Freedom First REIA, Ltd.

Continued from the previous post, we are highlighting basic questions and answers a potential landlord may have. Whether you're a new landlord or have interest in becoming one, there are no doubt questions that have come to mind! Here are a few you may want to know:

4. How often can rent be increased?

If a tenant has a month-to-month rental agreement, a landlord has the right to increase the rent with proper advance written notice at any time. If a tenant has a lease, rent increases cannot be made until the expiration of the lease if the increase is not indicated in the original agreement. A landlord must give at least 30 days advance written notice, be sure to check the current status of your state’s procedures surrounding this. 

5. When can a landlord enter the rental unit?

A landlord must give advance notice in writing before entering the unit. They are only able to enter during normal business hours. In an emergency, and other specific circumstances, advance written notice is not required- keep up-to-date with NYS standards.

6. What happens to the refund of a security deposit after the sale of a building?

When a building is sold, the selling landlord must do one of two things with the tenants’ security deposit: (1) transfer the security deposits to the new landlord; or (2) return the security deposits to the tenants following the sale. If the ladder, the new landlord can collect new security deposits from the tenants.
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When someone has an interest in becoming a landlord, there are a few things they’ll want to consider. The potential landlord may have some questions around common-placed terminology that a seasoned landlord is very familiar with. Because of that, we’re going to dive into some basic Q&As:

This is probably one of the most important and foundational questions and answers a landlord needs to know. Most people know what this is, even if they don’t know the exact definition. A lease is a legal contract that a tenant and landlord are bound to until it expires — it outlines critical information such as monthly rent, security deposits, rent increases, and tenant or landlord responsibilities. Most issues can be avoided by following the lease, and most tenant questions can be answered by the lease. Requirements for a lease agreement may vary by state, so it’s important to stay up-to-date with the current standards before going into an agreement.

Here’s another question that landlords may be curious about, especially if they’ve never been on either end of the tenant-landlord relationship. A sub-lease is a separate rental agreement between the original tenant and a new tenant who may move-in temporarily, or someone who moves in with the original tenant and shares the rent. This isn’t as common and in most leases, a sub-lease is not allowed. Landlords should make sure there is a segment in their lease agreement that clearly states whether this is allowed or not, if a tenant sublets when a lease does not allow it, a landlord has the authority to evict. If a sub-lease is allowed and executed, the original tenant is still solely responsible for paying the rent to the landlord.
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“Do not do to others what angers you if done to you by others.” -Socrates

So yes, this is real, and it is happening.

But it's also not something that means "instant apocalypse" for landlords, nor does it mean that every renter can simply and legally stop paying rent and " just tap their heels together three times and..." and pocket it as savings.

That's because, of course, there are caveats, provisos, etc. So, let's dive in...

First of all, the authority the CDC cites to establish this rule is the Public Health Service Act of 1944, which is also being cited in a variety of contexts over the course of the past 6 months.

Might there be legal challenges to this? Oh yes.

But that doesn't mean it's okay to ignore this eviction moratorium. It's on.

Per the ruling, the eviction stay is in place until the end of the year (for now).

But good news/bad news, this doesn't mean that anything goes.

Tenants must:

• Earn a documentable AGI (Average Gross Income) of less than $99,000 (single) or $198,000 (married filing jointly),
  AND
• demonstrate they have tried to pay at least some portion of monthly rent,
  AND
• have suffered income loss or medical expense increases due to COVID-19
  AND
• have applied for government assistance in some form or fashion,
  AND
• confirm and document that if they were evicted, they would be homeless or have to go to an unsafe, crowded facility,
  AND
• file a specific form with the landlord. (If you're a tenant needing to do this, I suggest sending the form by certified mail for legal paper trail purposes.)

So ... if you meet all of these requirements, then you can take advantage of this order.
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If you're a landlord, you'll want to listen to last week's Real Estate Round Table from Boylan Code! The discussion navigates around the current state of evictions and legal limitations surrounding this topic. The conversation also touches base on potential steps to take:
https://www.youtube.com/watch?v=eA767uSr8Tc&feature=youtu.be

Mortgage rates continue to be at an all-time low as we near the end of the third quarter of 2020. Will this continue as the uncertainty of the rest of the year remains?

Freddie Mac’s chief economist says that “these rates continue to incentivize potential buyers and the home-buying season, which shifted from spring to summer, will likely continue into the fall.” This is a positive prediction for those that are continuing to invest in real estate in the near future.

Though interest rates are low, it is still important to weigh the pros and cons before making your decision about an investment. The best way to go about this is to have a team of experts or a mentor that can guide you to make the right choice alongside your options and goals. Are you planning on renting out your property? Flipping and selling? There are different risk factors with each approach and looking at those specific factors coinciding with your personal objectives is essential.

 
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Last week we talked about traditional seller-financing scenarios. In those cases, the buyer actually bought and owned the property while the seller became a lender. Lease options are the exact opposite. The seller retains ownership of the property and become a landlord.

Firstly, sellers will need to be comfortable with becoming a landlord. But once that hurdle is overcome, these are great deals. It starts with the seller signing a master lease with the investor. A master lease is one where the tenant (in this case, the investor) can “sub-lease” the property to a standard tenant in a standard lease who will actually occupy the home. Normally, there is a spread in the monthly rent where the investor is making some cash flow.

This takes responsibility for maintaining the property off the hands of the seller, which is the reason most sellers go for this deal. It also provides some cash flow to them, and may defer taxes in some situations.

The second half of this deal is the option to purchase. The option agreement gives the investor the right, through an option fee, to purchase the home sometime in the future. This can lock down a good price in an appreciating market.

A lease option “sandwich” is a deal where once the investor has a master lease and option, he then subleases the property and assigns the option agreement to the tenant/future buyer. Often the investor collects a bigger option fee than he paid to the seller, so he gets cash now in addition to the rent cash flow.
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Last week we discussed a situation in which an investor partners with the seller on the project, which is one way to have the seller help “finance” the deal. In this blog, I’m going to explain what I call “Traditional” seller-financing because it’s the more common way to structure seller-financing deals.

 Traditional seller-financing is any situation where the investor actually buys the house and takes ownership through a closing. Then, in some way, the seller is helping to finance that purchase. I break traditional seller-financing into 3 sub-categories. Note: These descriptions are how I speak about them. Other investors may use different terminology. I separate them because, structurally, they are different.

The important point to distinguish traditional seller-financing from the others is that the buyer will actually own the property! And, anytime a mortgage is staying in place, there will be due on sale clause risks.

• True Seller-Financing: This is a deal in which the seller owns the property outright with no mortgage. In this situation, the seller simply becomes a bank and “carries” a note and deed (mortgage) by exchanging his equity for the promissory note. The money doesn’t change hands as it’s all on paper. The seller earns some extra money on the interest. The investor gets a better rate than other lenders. All you need is a good contract and then a good note and trust deed. Since there is no underlying mortgage, there is no due on sale clause issues.
• Subject-to Seller-Financing: In this deal, there is an underlying mortgage that the investor is simply taking over. Think a loan assumption but without the bank’s involvement. The seller either has no equity or is cashed-out of her equity at closing. So, there is nothing left owing to her. The investor can obligate himself through the contract to make the monthly payments or through an all-inclusive note and deed (“AITD”) that mirrors the terms of the underlying mortgage. This AITD, while optional, is a cleaner way to structure this deal and provides the seller extra security that you’ll make the mortgage payment. The seller could foreclose on the AITD to take the property before the mortgage bank even finds out.
• All-Inclusive or “Wrap” Seller-Financing: In this deal, the seller is financing an amount that is greater than the balance on the underlying mortgage. So, she’s helping finance some of her equity in the house. Because she is owed money after the closing, this deal always requires an all-inclusive note and deed or AITD. An AITD is a mortgage that “wraps” around the underlying one. So, let’s say the seller is financing $150,000 with an underlying mortgage balance of $135,000. The investor makes payment on the $150K note to the seller; and the seller makes the payment on the underlying mortgage payment, keeping the spread. At payoff of the AITD, the underlying mortgage must be paid off first (that’s the “wrap” part) and anything left over goes to the seller’s balance on the AITD.

Jeffrey S. Breglio, Esq.
Breglio Law Office and REI Mastery U
www.reimasteryu.com
jeff@bregliolaw.com
(801) 560-2180
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See full content here: https://www.keepingcurrentmatters.com/2020/07/31/where-is-the-housing-market-headed-for-the-rest-of-2020-infographic/

When we talk seller-financing, or “creative” financing, we are really talking about a very large number of ways to structure the deal. Each kind of deal is structured differently, has different documents, and has different risks involved. That’s why the first key to seller-financing is understanding all the different options and deciding which is the best route.

There are 4 major types of deal structures (and even these can be broken down). I categorize seller-financing the way I do based on a) who owns the property, b) what documents are needed and c) the risks involved.

Here are the 4 main seller-financing deal structures:

1. Seller Partnering
2. Traditional Seller-Financing, or Note & Deed Seller-Financing
3. Lease Options
4. Contract for Deed

One common element among all types of structures is the long-term arrangement with the seller of the property. In a typical purchase and sale, the seller sells the house outright at a closing and is never heard from again. But in these deals, you will have some “connection” with the seller that extends beyond the contract or closing—possible for decades. You need to understand that all of these deals are long-term partnerships with the seller. Understanding partnering in real estate is crucial.

The first structure, Seller Partnering, is any deal where the investor “partners” with the seller no differently than a partnership with another investor. This can take on any arrangement (other than the other 3). Normally, this will include a joint venture agreement with the seller. Here’s an example:
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Under One Roof made a big entrance as the coalition stood to represent the landlord voice across New York State when the Housing Stability & Tenant Protection Act of 2019 came into play. With a plan to stand together and address the unintended consequences for both tenants and landlords, the coalition voiced concerns with more traction than just a local association.

This coalition continues to provide connections to lobbyists with the ability to make change on a statewide and local level. Through current times, they still work on fielding requests, calls, and inquiries. The access and push for action has and will continue.

Join the conversation on Real Estate Roundtable, where the attendees touch base on Under One Roof: https://boylancode.com/RERT/