A very important and hard lesson learned

[vandriani]

Firstly, I`m assuming insurance would not cover this.

Secondly, could you not shut down that suite, remove any mold that may affect the tenants within the suite, feed that dog until you can save some money to do the repairs.

This may be a better option than foreclosure.

I know the sellers are being difficult and I do not know the details of the VTB but maybe you could renegotiate the terms.

As for incorporation, I`m still up in the air but I will be keeping it in mind as i move forward in this.

 

[Nir]

QUOTE (DaveRhydderch @ Apr 15 2010, 08:35 AM) If you see quick fixes or small things that are wrong, it can tell you a lot more about the home.

you mean such issues can tell you the previous landlord was a slumlord? perhaps but the challenge is when the
inspection report also shows ONLY small things(!) then it is difficult to decide NOT to buy if price is Great. TX.

 

[Dan_Eisenhauer]

I appreciate everyone`s comments. My options have become very limited. I may be able to protect the balance of my portfolio. But, there is no guarantee.

My reason for starting this thread was to issue a hard learned warning that our portfolios can come crashing down if we do not take steps to protect them. It was not meant to be a discussion on why or how this situation developed.

My BC lawyer has suggested holding each property in a separate corporation. That may be a bit extreme, but I now understand why he gives that advice. I will set a given number of doors, yet to be decided on, for each corporation to own.

When buying your properties discuss liability issues with your lawyer. Do not assume that you are safe from external forces when holding properties in your own name. Weigh the pros and cons very carefully. That is my message.

 

[emarsig]

Dan,
You need an Alberta lawyer. But there is some good news from what I understand (I was a lender in a similar situation):

1. If you buy the property under your personal name in Alberta, then your mortgages are "non-recourse" loans. This means the property value guarantees the mortgage, even if, due to market devaluation, the mortgage is "under water" (LTV exceeding 100%). You do not guarantee a penny above.

2. If you buy under a corporation, then you probably have to guarantee personally, and then you are on the hook.

Since you have no equity left in the property and you face additional repair bills, you can just walk away from the property.
Send to the keys with a nice thank you card to the vendor who stiffed you.

Ernst

 

[Thomas Beyer]

QUOTE (Esaum @ Apr 15 2010, 06:26 AM) ..You can have a controlling interest without having a ownership interest...

true .. but much tougher to get a mortgage as the share owner and/or beneficial owner (wife, mother, trust ..) usually has to sign a personal guarantee !

 

[Nicola]

QUOTE (Dan_Eisenhauer @ Apr 17 2010, 01:56 AM) I appreciate everyone`s comments. My options have become very limited. I may be able to protect the balance of my portfolio. But, there is no guarantee.

My reason for starting this thread was to issue a hard learned warning that our portfolios can come crashing down if we do not take steps to protect them. It was not meant to be a discussion on why or how this situation developed.

My BC lawyer has suggested holding each property in a separate corporation. That may be a bit extreme, but I now understand why he gives that advice. I will set a given number of doors, yet to be decided on, for each corporation to own.

When buying your properties discuss liability issues with your lawyer. Do not assume that you are safe from external forces when holding properties in your own name. Weigh the pros and cons very carefully. That is my message.

Just wondering - if you transfer properties to a corporation, will you potentially create a taxable capital gain?

 

[Dan_Eisenhauer]

There is one other very important lesson for me here.

I replied on my meager real estate holdings to provide the income on which I have lived for the past few years. I gave up "a day job" way to early, thus giving me no way to finance or pay for the needed repairs. This is the one area of this mess that I had control over. I did not act in my own best interest.

Needless to say, I have learned my own lesson here, and am in the process of reactivating my property management and strata management licenses, and have been all but guaranteed a job when I have them back, probably within 8 weeks.

So, to those who want to quit their day jobs, be certain your RE portfolio can sustain your lifestyle, as well as cover unexpected expenses such as this. Don`t be the dumb ass I was and think your RE income will grow indefinitely. We all know what happened 18 months ago in AB.

 

[gwasser]

QUOTE (Dan_Eisenhauer @ Apr 22 2010, 11:40 AM) There is one other very important lesson for me here.

I replied on my meager real estate holdings to provide the income on which I have lived for the past few years. I gave up "a day job" .....

So, to those who want to quit their day jobs, be certain your RE portfolio can sustain your lifestyle, as well as cover unexpected expenses such as this. Don`t be the dumb ass I was and think your RE income will grow indefinitely. We all know what happened 18 months ago in AB.

We all get overconfident when things go right. Those are the time I make most of my bad moves. So, no need to call yourself a `dumb ass`. We`re rooting for you.

 

[vandriani]

QUOTE (Dan_Eisenhauer @ Apr 22 2010, 10:40 AM) There is one other very important lesson for me here.

I replied on my meager real estate holdings to provide the income on which I have lived for the past few years. I gave up "a day job" way to early, thus giving me no way to finance or pay for the needed repairs. This is the one area of this mess that I had control over. I did not act in my own best interest.

Needless to say, I have learned my own lesson here, and am in the process of reactivating my property management and strata management licenses, and have been all but guaranteed a job when I have them back, probably within 8 weeks.

So, to those who want to quit their day jobs, be certain your RE portfolio can sustain your lifestyle, as well as cover unexpected expenses such as this. Don`t be the dumb ass I was and think your RE income will grow indefinitely. We all know what happened 18 months ago in AB.

IMHO...this advise is very important to the newbies out there. As this is explained as a REIN philosophy, it is another example of the great teaching of REIN.

 

[Thomas Beyer]

QUOTE (gwasser @ Apr 22 2010, 11:28 AM) We all get overconfident when things go right. Those are the time I make most of my bad moves. So, no need to call yourself a `dumb ass`. We`re rooting for you.
Indeed !!

A dumb ass and a smart brain are closely related .. Usually in the same person !!

 

[Dan_Eisenhauer]

Here is an update on what is happening.

I tried jumping through dozens of hoops to save this. However, foreclosure seems to be the only option now, with the court hearing scheduled for the end of July. You investors who want a good 4plex in NE Edm, keep your eye on the MLS next month.

NOW, here is the rub. This week I received an offer from the sellers/VTB holder offering to discount the mortgage by $50K if I paid them out today. That is more than I asked of them to help me work through the building`s problems. If only they has shown that flexibility in March.

My partner thinks the Sellers thought I was bluffing, looking for an after the sale price reduction, and therefore ignored my requests and suggestions. Other than this week`s fax from their lawyer, I have had no response from them at all. Who knows what they were thinking?