We closed on the purchase of The Neighbor House yesterday…
While it took about a month past the original closing date, everything went pretty smoothly. I was planning on closing this one with a loan, but the title company pulled a short version of the title, and my lender wouldn’t finance the property without the long-form title search (they didn’t want to find problems down the road).
Long-story short, I ended up closing with my own cash, and my lender agreed to refinance the property with their own attorney and title company this week.
Also, if you recall, I was looking to wholesale this deal to another investor because of the deed restriction imposed by Fannie Mae (the seller). Basically, the restriction says that I’m not allowed to sell this property for at least 3 months if the sale price is over 20% above my purchase price.
Well, it looks like the closing attorney forgot to add the restriction onto the deed, so from the perspective of whoever handles my sale, they won’t know that there is any restrictions. That said, while I could probably get away with selling this property whenever I want and for however much I want, I do run the risk of Fannie Mae coming back and enforcing the restriction later (if they ever figured it out).
So, I probably won’t take the risk of selling it for too much, too soon, and am still looking to wholesale it to another investor…
{ 7 comments… read them below or add one }
Might be worth fixing it and reselling it? If they didn’t put a restriction on the deed it’s going to be tough for Fannie Mae to track it down.
Any luck finding apartments or commercial stuff?
Steve -
It’s certainly tempting…though I still have this nagging feeling that if I try to do it, it will come back to bite me one way or the other…
I may consult my attorney to figure out what the worst-case scenario/penalty would be if I got caught, and make my decision from there…
I just found found your blog. I spent about an hour reading through all your old post. What a great blog! I am going begin investing in real estate in the near future. This site will be a great tool. Thanks!
-Brian
*going to begin
You mentioned using your own cash…I have often wondered what kind of nest egg you had from your previous life when you started. Have you ever worked with a self directed IRA? Or do you know anything about them you can share??
thanks
Don
Don, you will want to think long and hard about using your retirement IRA for real estate investing. I would start with the banks first, then perhaps doing a joint venture with someone. A good JV partner could also be your contractor.
Hi Don -
We actually run two separate investing companies. The first is funded by our personal savings, plus we have a line of credit from a small, local bank that finances many of our properties. Between the line of credit and the cash we have invested, we have access to enough funds to hold/rehab about 6 houses simultaneously. (Btw, this is why I highly recommend working with local banks)
Additionally, we own a separate corporation that is similar to a self-directed IRA (SDI), but actually much more flexible. It is funded by portions of my wife and my retirement funds, and allows us to operate a full-fledged investing company using the money. Unlike an SDI, where you can’t materially participate in the investment, the operating company that we have REQUIRES us to be involved in the company’s operations on a day-to-day basis. Additionally, unlike an SDI (or most other retirement vehicles), our company allows us — actually, it requires us — to draw a salary from our profits. There are some downsides — such as the fact that this retirement vehicle must be structured as a C-Corporation and therefore is taxed sub-optimally — but overall, I find it much more suitable to operating a full-time investment business than an SDI would.
If you want more info, shoot me an email…