Love Austin Homes Investing Blog

Does anyone here have a recommendation for a good, experienced small
business CPA? Thank you very much.

ANSWER

Yes,
I use I Jay Arrons 512-451-2800.

Phill

Went to the RE club this past Tuesday. Learned that REICA’s position is not to do lease option but do a wrap. My question is how do you do a wrap if there is an existing loan on the property? Loan not assumable. Wouldn’t a wrap trigger ‘due on sale’? Thanks.

Rex

ANSWER

Rex,

Any title company can help you do a wrap. Just tell them the terms of the note, and their attorney will draw it up for you. Or you can use your own attorney.

When I do a wrap, I like to get a down payment (if possible) of 3-5% (or more, if possible), and ask for a balloon payment in 3-5 years (forcing them to refinance and pay me off). In most cases you are going to ask for a premium interest rate, perhaps 10-12%. You may also include terms that say that you have the option to renegotiate the terms if they do not refinance (this could include calling the note and/or foreclosing, changing the payment terms, etc.).

In most cases there IS an existing loan on the property. That’s why is called a wrap - you are ‘wrapping’ the new loan around the existing financing. It makes no difference if the existing loan in your own name or one in someone else’s name.

If the home and loan is in someone else’s name, you will almost certainly have to purchase the property ‘subject-to’. This is a technique where you take over the payments of a loan in exchange for getting the deed. This technique can be quite complex and beyond what I have time to explain here. With only a few exceptions, almost no loans are assumable, however virtually all homes can be purchased subject-to.

Regarding ‘due on sale’, yes, whenever you transfer ownership, which you are doing with a wrap, you risk having the underlying loan called. There are many advanced techniques to help reduce this risk. That being said, it would be an extremely rare (i.e. 1 in a 1000) event for a lender to actually call a loan in which the payments are being regularly made, regardless of what other terms of the note are violated. I have bought scores of homes subject-to, and never had a problem.

Phill

I have run into a bit of a road block on remodeling one of my houses due to a city inspector. The small house I am working on has had a full internal electrical rewire and when we called the City inspectors office to come out and inspect the work, they came back and approved the inside wiring but wanted us to move the outside breaker panel box and meter to a different location because they say it is closer then 5 feet from the outside Gas meter.

Now keep in mind we did NOT change the existing box or meter but just tied into it. We told the inspector that we would be willing to move the Gas meter down some to get it further away from the electric. However, the city inspector is adamant about not only moving everything closer to the front of the house but also getting us to put up a new mast / weather guard because the way it is and originally was attached to the house from the City’s electric pole.

Anyway, I need to know if someone might have a Higher up contact in the City’s electrical inspection department in order to come up with some better options on this situation in order to save time and money by not having to move everything around.

Thanks for your help in advance.

Tim

ANSWER

Tim,

I always end up giving in and doing what the inspector asks in these situations. These two requests are common. They will undoubtedly also ask you to dig a large hole for a new ground line. If someone knows how to get around these sorts of requests, let me know…

Phill