A Gallery of Low Prices

“Price cuts, short sales, and foreclosures cross my desk in herds these days. Since the start of the new year, it seems that the sellers of houses, townhouses, and condos who are eager to unload their property have become markedly more serious about making it happen.” -Dennis Rodkin Chicago Magazine

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Christian Chase

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS
Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON – In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Savvy investors have been snatching up deals for the past 10 months to buy, fix and sell for profit.  Contrary to popular belief we are in the best flip market in the past 15 years.  There are a few critical factors that have contributed this opportunity. I will list them below:

1. New construction is almost non-existent. Banks are unwilling to lend money to builders who build on speculation. Over the past few years banks have been taking back incomplete projects and disposing of this property at pennies on the dollar. (This is much worse to the bank than a typical foreclosure.)

Why this is an advantage for my investors: Our toughest competition has been eliminated. Builders always have an upper hand on foreclosure investors, they can build almost anything anywhere. If a buyer needs an extra bedroom they can build it, we are limited and as a result lose many end-buyers to these competitors.                                                                       No Builders = Less Competition           

2. Short Sales are a huge percentage of the market. Look through the MLS today and you will see many units listed as a “short sale”. These units are a large percentage of total homes listed. Realtors are severely limited on what they can show. A short sale can take anywhere from a month to a year for approval.  Agents and buyers are unwilling to enter into these unpredictable contracts.

Why this is an advantage for my investors: Our competition is difficult to purchase for the everyday home buyer. If someone has a lease and needs to move on a particular day or a company relocates an employee they will shy away from this type of  property.  Buyers look for predictability and our home sales are just that, very predictable.                                      Short Sales = Unpredictable Purchase 

3. Current homes listed are in sub-par condition.  Home sellers who have their homes listed are not spending money on making improvements. They feel why pour money into a property they are already losing money on.  As a result, many homes listed today need paint, carpet, and updating.

 Why this is an advantage for my investors:  All of our homes listed are totally remodeled. We make our units look like new construction. When buyers look at other MLS units many need those improvements, our unit is ready to move-in and priced at or below our competitors.                                                                                                                                                      Property Needing Repairs = Sub-Par Competition

4. Bankers lending to qualified investors. The days of goof-balls getting loans are long gone. You need three things to invest today. 1. Good Credit 2. Good Income 3. Good Tax Returns

Why this is an advantage for my investors: If you are reading this you most likely are a client of mine and my clients have all three requirements and then some!                                             Goof- Balls Gone = Good Selection of Loans and Property.

If you are visiting the Tampa/Clearwater/St. Pete area stop by our beach office.  Our family has owned an office here since the 1960’s. We do many of the same things as our Chicago location – foreclosures, investments and rentals. 

Give Walt Chase or Matthew Bailey a call at 727-480-9050.  Florida Website: www.ChaseFlorida.com Check out some deals and catch some waves.

In order to diversify risk, someone with multiple rental or other investment properties would likely be advised to place each property into a separate entity. This was traditionally achieved with the use of a corporation or limited partnership in years past. Recently, however, the limited liability company has quickly become the entity of choice for real estate holdings.

Placing high risk assets in separate entities, away from each other, and especially separate from low risk assets, defines asset protection. For example, someone who operates a demolition company through use of a corporation or LLC should not then place an investment rental property in the same LLC or corporation. Similarly, someone with a large amount of low risk assets such as cash, securities, etc. should not be advised to place those assets into the same entity as an ongoing business. But, adherence with the principle tenets of asset protection can be costly. Placing each parcel of real estate into separate entities incurs separate filing fees, and incurs additional legal and accounting fees in most instances.

There is, however, a solution to the increased fees associated with multiple filings: the Series LLC.
The Delaware LLC Act first authorized the creation of separate series within the same LLC. Under the Act, debts and other liabilities under the Delaware Act are enforceable only against the segregated assets in the particular series to which those assets have been placed. (Delaware Limited Liability Company Act, Section 18-215). The Delaware Act also states that each series may have different members, or the same members with different percentages than in other series apart of the parent LLC, providing flexibility for projects with multiple investors.

This combination allows a series to be treated in many ways as a separate and distinct LLC. The Act also authorizes the Operating Agreement of the LLC to designate a series of members, managers or other interests that have separate rights and duties with respect to specific LLC property.

Recently, the Illinois General Assembly has adopted an amendment to the Illinois LLC Act authorizing the creation of the series LLC. (805 ILCS 180/37-40). Similar to the Delaware Act, the Illinois Act states “the debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the series thereof,….”. (805 ILCS 180/37-40(b)).

For Illinois real estate investors, this means you can create one parent LLC with multiple series to protect your assets, avoiding multiple state filing fees, legal fees and other professional costs associated with creating each separate LLC.

In order to create a series LLC, special language must be included in the Articles of Organization, which is filed with the Illinois Secretary of State. A Certificate of Designation for each series apart of the LLC must also be filed with the Articles of Organization.

But keep in mind, obtaining and preserving separate liability status requires that each series be operated as a separate entity. This means separate records should be kept for each series, with the assets of each series identified. Unfortunately, case law is largely undeveloped for the series LLC structure. This is especially true in Illinois. Without the benefit of judicial decision, many facets of the new series LLC legislation may be subject to reasonable difference in interpretation. For instance, some practitioners have argued that it is safe practice to provide each series with a separate bank account.

Also, an entity formed in one state cannot do business in another state unless it is first “qualified” to do business in the non-formation state. This is achieved by filing an application with the Secretary of State of the non-formation state and paying a foreign filing fee of some sort. Without qualifying to do business in the non-formation state, the entity may later incur penalties and other fees for not qualifying. Once an entity qualifies to do business in the non-formation state, it basically becomes subject to the non-formation state’s laws, presenting a problem for the series LLC structure.

If an LLC is formed in Illinois, and qualifies to do business in another state so that it can own real estate in that state, then that LLC becomes subject to that state’s law. The exception is the internal affairs and management of the LLC itself. The non-formation state will normally apply the law that is either designated in the LLC’s Operating Agreement or the laws of the formation state. But, this typically involves disputes between members as to how the LLC is owned or operated and does not include disputes with creditors or third-parties who are not a party to the operating agreement. Any state without Series LLC legislation is very unlikely to apply the Series-legislation as to creditors, claimants, and other third-parties who did not agree to be bound by the Series legislation.

This problem is why corporations, LLCs, and other entities formed in other states probably don’t offer any advantages over those formed in the state where property will be held or business is conducted. Effectively, doing this doubles formation fees and non-formation law will apply anyways.

Regardless of any perceived disadvantages, this structure is quickly becoming the vehicle of choice for Illinois investors with multiple properties.

The most comprehensive real estate investment calculator available.  We have taken ALL of the guess work out. This is the exact calc I personally use when creating the pro forma.

Analyze your deals using two different formulas:

Calculator #1 Fix up & Sell (Flip)

Calculator #2 Fix-up & Rent ( Cash-out Refi)

Calculator #3 Amortization Schedule

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Learn new ways to finance foreclosed real estate. Perfect for active real estate investors.

Our in-house investment lender will present information on the 10% down investor loan and  hybrid loan programs.

New “Stated” loan program to arrive in 2010.

January 21st 2010

Class starts: 6:45pm

Chase Real Estate 1315 Macom Naperville - University Room

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Frozen pipes are very common this time of year. Most of the homes we purchase are winterized and as a result will not have frozen pipes. Investors will run into frozen pipes more often after the property has been remodeled and is listed on the market.

Once the property has been remodeled and the furnace is working, the home is warm. Problems arise when the gas or the furnace are shut off. I have seen pilot lights go out from wind down the chimney. The gas bill is sent to the wrong address, the investor forgets to pay. As a result, the gas company turns off the gas.  Frozen pipes are almost always the end result.

The best way to protect the property is to remind the handyman to turn off the water at the main line inside the home. Keep the furnace at 55 degrees.  If the furnace stops working the only issue will be a broken pipe, we will not have Niagra Falls in the home.

For sales purpose post the “Notice” on the counter explaining to buyers and their agent not to use the bathrooms. If they are having a home inspection they can turn on the water at the main inside the property. Then, they are instructed to shut off water after testing.

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