This appears to be further tightening of standards that Wells Fargo announced on February 27, in which they were pulling some loan products out of some markets and increasing down payment requirements in others.  The February 27 report stated that underwriting standards are also being tightened in markets in Arizona, Colorado, Connecticut, Washington, D.C., Illinois, Louisiana, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, Wisconsin and West Virginia, Reuters reported.

One example is that JP Morgan Chase hit its top month of foreclosures in the middle of 2008 and their numbers have been steadily falling.  Unfortunately, the bank is estimating that it could again beat that previous record by the fourth quarter of 2010.  Data released by RealtyTrac shows that banks are now slower to take properties back through foreclosure despite the fact that more and more homeowner are falling behind in their payments.  This new wave of foreclosures are less the result of ARM mortgages adjusting and over leveraged properties. They are the result of job losses or changes in income.

Maybe a wave 3?  I hope not, but there is an estimated 11 million US homeowners that now owe more on their mortgage than their home is worth.  Many of them will decide that keeping that home is not worth it and will become delinquent.  Hopefully some of these will opt to sell their home via a short sale instead of letting it go into foreclosure.  By the end of 2012, 39 percent to 50 percent of home purchases in Phoenix will still be foreclosed properties, J.P. Morgan Chase has estimated. Wow!

According to the National Association of Realtors, the inventory of bank owned or bank mediated (short sales) properties declined from 49 percent of the inventory of homes sold in March 2009 to 38 percent of the inventory in January 2010.  Additionally, the inventory is down to just a 7.8 month supply from a high of 11 months in July 2008.  A stable market is around 4 months; we still have some time to go.

• 3 bedrooms per unit with a 1/2 bath and full bath in each one
• Each unit has its own laundry.
• Central A/C in each unit with new high efficiency furnaces.
• Commercial grade sprinkler system.
• Low maintenance vinyl siding and windows.
• 3 car garages.
• Average rent is $1200 per month.
• 5 of the 6 units are fully rented.

Best of all, they are located next to each other in NE Minneapolis.  You could own 6 units at one location that produce around $86,400 per year in gross rent!  See more of the details here:  55/59 Lowry Ave NE, Minneapolis

Contact me with any additional questions, 612-281-5419.

If you have ever been in a competitive bidding situation  for a property and lost, you know how frustrating it can be.  There are more than a few of my customers that ask the question:  “How do we know there is another offer”.   Jay rants and then brainstorms about possible, but unlikely ways to validate that there truly is another offer over at The Phoenix Real Estate Guy.

No, you shouldn’t feel bad about it, and you shouldn’t feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family’s finances first. Read the rest at MaryAlice Short’s blog, the Minnesota Short Sale Expert.

I have seen lots of frozen houses and broken pipes, but nothing like this.  I was surprised that there was 4+ inches of ice in this back entry.  It appears the water was running for several hours to accumulate this ice field.  It must have been just at the freezing mark as otherwise, this water would have spread out much further than it did.

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Check out how the doors are actually iced shut.  Great locking mechanism!

Should you transfer the title of your investment property into your LLC?  You could probably ask 10 different people for their position on this issue, and receive 10 different answers.  My position is that I do not like to transfer title from the individual to the LLC – for a couple of reasons.  First, transferring the title when the mortgage is still in your name triggers a due on sale clause within the mortgage/note.  Second, if you ever go to refinance, you will have to transfer title back out of your LLC to you individually, creating a strange series of transactions for your lender and/or title company to sort through.

My position rests on the assumption that you have properly formed your LLC, complying with all of the statutory corporate formalities including organizational minutes, bylaws, appointing the Board of Governors, Managers, Membership Units, etc.  In addition, all of your business dealings are done in the name of the LLC – your lease with the tenant will be between the tenant and the LLC, the tenant should pay the LLC, and the LLC has a separate bank account and accounting records.

From a legal standpoint, the tenant’s contract is with the LLC, not with the investor as an individual.  If something goes wrong, they should sue the LLC, not the individual.  That is not to say that someone couldn’t try suing the individual – it is not uncommon for a litigious person to throw everything against the wall to see what sticks.  Even if your strategy was to transfer title from your personal name to the LLC in order to “tie” the property to the LLC, the mortgage would still be in your name anyway, thus leaving the same issue for that litigious person to throw against the wall.  In addition, if you completed all of the other steps to adequately form and operate your LLC, the argument to be made is that it would be bad policy if a court ruled that in order to receive liability protection from your LLC, that you should have violated the due on sale clause in your mortgage/note.

Again, every new business must start the ball rolling somewhere.  Every new business is started with the capital or credit of the owner.  Eventually when you have built your portfolio, built your LLC’s credit history and property equity, you will no longer need to purchase properties with your own credit and in your individual name.  Your goal will be to get loans through the LLC and thus title in the name of the LLC.

Remember, most banks do not make loans to brand new LLC’s, therefore you must start the ball rolling by purchasing your property personally.  Perhaps the bank/lender will allow the LLC to purchase the property with the individual’s personal guarantee or co-signature on the note.  If the bank will not accept the personal guarantee, there are several other options to consider.  Some strategies could include the individual leasing the property to the LLC, which would then lease the property to the tenant.  Alternatively, there could be a written agreement between the individual and his LLC whereby the individual pledges and confers upon the LLC the right to possession of the investment property.  All of these alternatives should be documented through company minutes of the LLC that acknowledge and authorize the LLC’s use of the investment property.  Having these added formalities can only strengthen the liability shield created by the LLC.

Please feel free to contact me at the number below if you need assistance, have questions or concerns with respect to properly forming your LLC or incorporating additional investment property ownership strategies to strengthen the liability shield created by the LLC.

Matthew A. Engel, Esq.

Aase, Engel & Kirscher, PLLC

2499 Rice Street, Suite 236

Roseville, MN 55113

651-209-6884

matthew [dot] engel [at] aeklawfirm [dot] com

www.aeklawfirm.com

A Notice to Quit would be required in a “tenancy-at-will” situation, which means there is no fixed ending date, or the lease has expired and is now month-to month.  Minn. Stat. 504B.001 defines tenancy at will: “Tenancy at will means a tenancy in which the tenant holds possession by permission of the landlord but without a fixed ending date.”

In such cases, this is what Minnesota law says about terminating tenancy at will:

504B.135 TERMINATING TENANCY AT WILL.

(a) A tenancy at will may be terminated by either party by giving notice in writing. The time of the notice must be at least as long as the interval between the time rent is due or three months, whichever is less.

(b) If a tenant neglects or refuses to pay rent due on a tenancy at will, the landlord may terminate the tenancy by giving the tenant 14 days notice to quit in writing.

Notice must be given in writing that the tenancy will be terminated on a certain date, and should state that if the tenant does not vacate by that date, an eviction action will be pursued. The notice should be drafted with a termination date pursuant to the applicable time period from section (a) or (b) of Minn. Stat. 504B.135 – the interval between time rent is due (typically 1 month or up to three months), or if termination is for non payment of rent, 14 days.

Here is some sample langauge for written notice terminating tenancy at will:

• The purpose of this written notice is to terminate your tenancy at will.  Please be advised that your tenancy will be terminated on ___________  ____, 2010, [14] [30] [60] [90] days from the date of this notice, pursuant to Minn. Stat. 504B.135.  If you do not vacate by this date, an eviction action will be pursued in ___________ County Housing Court to have you removed from the property.

I suggest the written notice be sent to the tenant via certified mail, return receipt requested, as well as a second copy by regular mail, mailed at the same time.  In case the certified mail is returned for refusal to sign or failure to pick-up, you’ve also sent the written notice via regular mail to the tenant’s address – save the return receipt, if returned, or the refused certified letter, which will be returned to you – for the court hearing.

After the notice to quit time period has expired, and if the tenant still does not vacate, then an eviction action would be required to remove the tenant.  Eviction action hearings are typically set 14 days from date of filing the Eviction Action Complaint.  The Eviction Action Complaint must be served on the tenant at least seven (7) days prior to the hearing via personal service with affidavit under the Minnesota Rules of Civil Procedure (by a third party not a party to the action), and if personal service cannot be made, the process server can complete service by posting on the property after two failed attempts, and then completing an Affidavit of Not Found and Posting.  See Minn. Stat. 504B.331.

Matt Engel

Aase, Engel & Kirscher, PLLC

2499 Rice Street, Suite 236

Roseville, MN 55113

T: 651-209-6884

F: 651-209-8088

C: 612-385-0554

www.aeklawfirm.com

I was reading this week’s Carnival of Real Estate and Dan Green’s post on The Mortgage Reports.  He has a short example of why you should only be getting advice from professionals in the discipline.  Dan found a news article in his local newspaper that had just glaring mistakes.  Unfortunately, the unknowing public that reads this mis-information doesn’t know any better.  Check out Dan’s post at The Mortgage Reports.