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Real-Estate-Investors-Buying-Foreclosures-231x300

Author: Staff

The possibility of foreclosure has been a persistent reality for real estate owners for some time. Foreclosures often occur when property owners default on their mortgages. County or state authorities may also foreclose on a property after the owner fails to pay property taxes. In some situations, a homeowner’s association may foreclose for failure to pay fees or assessments, or for other breaches of the applicable covenants, conditions, and restrictions. For California real estate investors, foreclosure auctions could present an opportunity to acquire property below market price. Investors should be aware of the significant risks that often come with properties sold at a foreclosure auction, and they should carefully research any property before the auction date.

Judicial vs. Nonjudicial Foreclosure

California allows two types of foreclosure: judicial and nonjudicial. In a judicial foreclosure, the creditor or its agent must file a lawsuit and obtain a court order before they may conduct an auction. Nonjudicial foreclosure, which does not require a court order, is possible when the deed of trust signed by the mortgage borrower includes a “power of sale” clause. This clause authorizes a designated trustee to conduct a foreclosure, and essentially waives the borrower’s right to a court proceeding. Creditors must still meet numerous requirements regarding notice and opportunity for the borrower to cure a default.

Right of Redemption

From a real estate investor’s point of view, the most important distinction between judicial and nonjudicial foreclosure involves the borrower’s right of redemption:
– In a judicial foreclosure, the defaulting borrower can get the property back by paying the full amount owed to the lender, plus additional costs. The deadline to exercise this right is either three months or one year after the auction date.
– In a nonjudicial foreclosure, the borrower has no right of redemption. All sales are final, so to speak.
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Author: Staff

When considering an investment in California real estate, prospective investors should carefully consider how much of their time and attention the investment will require. Properties that generate rental income require management in order to ensure that the stream of rental income continues unabated. Investors who are willing and able to take on this responsibility may do so, but they should also consider retaining a property manager to handle the day-to-day operations. Property managers in California must have a real estate license to perform functions like soliciting tenants or negotiating and enforcing lease agreements. Otherwise, they are not required to have a specific license.

Types of Property Managers

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Hard-Money-Loans-300x200Author: Catherine Way, Digital Marketing Manager for Prime Plus Mortgages

Prime Plus Mortgages is a licensed hard money lending company. We specialize in hard money loans, or HMLs, for developers, property flippers and buy-and-hold strategists. Hard Money Loan programs make private money available for small to medium scale projects.

The early bird gets the worm: the sooner you can find and close on a golden real estate opportunity the better. That’s why it’s surprising that more real estate investors don’t use hard money lenders. What a lot of house flippers and real estate investors forget is that money makes the world go round. Having fast access to funds isn’t a need, it’s the lifeblood of almost every real estate investment transaction in this modern age. Hard money loans make it easy to get funded quickly, and get a house flipped even faster.

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Author: Staff

Investing in California commercial real estate requires extensive planning and research. A prospective buyer must consider potential legal, financial, structural, and environmental issues. This process of research and review is commonly known as “due diligence.” Since every real estate investment is unique, the precise due diligence process will be different each time. The following is a very general checklist, which may apply to a wide range of properties.

1. Investigate both the property and the seller

Due diligence for a commercial real estate investment is about more than the property itself. An investor should also look into the seller’s reputation and their track record for similar transactions. Even if the property is spotless, an investment might not be worth the risk of an unscrupulous seller.

2. Title and Survey

Inaccurate identification of a property is a common complication. An investor should obtain the full legal description of the property, to compare to official real estate records.
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Author: Staff

Investing in California real estate often requires assistance from real estate professionals, who have specialized education and experience in particular aspects of the real estate business. The term “professional” often means that a person has obtained a license or certification from a state agency charged with monitoring and enforcing ethical obligations. Certain professions require a license from the state, followed by continuing education and adherence to a code of conduct, like California real estate agents and brokers.

The term “professional,” however, sometimes simply refers to an individual who works in real estate, but who is not bound by a specific code of professional ethics. In either case, real estate professionals owe certain duties to clients and investors, and are liable for damages if they breach those duties.

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Author: Staff

For California real estate investors, rental property can produce reliable revenue streams, but these come with responsibilities. Landlords leasing residential properties in California have numerous obligations under various implied warranties. Leases for commercial property have far fewer built-in obligations for landlords. A commercial landlord’s obligations are often limited to the specific terms of the lease contract. Commercial tenants, on the other hand, may have many additional obligations beyond paying rent. While this might appear to benefit landlords, it can also mean significant losses if a commercial tenant breaches their lease. California investors should know the remedies available to them.

Commercial vs. Residential Leases

As mentioned earlier, commercial leases are subject to fewer requirements under California law than residential leases. A commercial lease, for example, does not include the implied warranty of habitability, which obligates a landlord to maintain leased premises in liveable condition for the benefit of tenants. By contrast, maintenance of the property, or even construction of improvements on the property, could be a tenant’s obligation under a commercial lease. Commercial landlords could lease a property on an “as is” basis, as long as the tenant has given informed consent to this arrangement.

Commercial landlords in California are usually bound by the covenant of quiet enjoyment, which protects the tenant’s right to use the property for the purposes expressed in the lease. Unlike residential leases, this covenant can be waived in commercial leases, with the agreement of both parties.
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Author: Staff

With regard to how they can invest their money, California real estate investors have many, many options. They can invest directly in a project, becoming a co-owner or creditor. An investor who joins a project as an owner or partner might take an active role in the project. Investors who prefer a more passive role can invest in a formal business structure like a real estate investment trust (REIT), which is similar to buying shares in a corporation, or a real estate syndicate. (You can read about the differences between a REIT and a real estate syndicate here).

Investors in a real estate syndicate pool their money for a particular project, which might involve improvements to an existing property or an entirely new development. The person or business that initiates the project is known as the syndicator. While the investors take a passive role, the syndicator manages the project, usually in exchange for a fee and a percentage of the profits. The investors place a considerable amount of trust in the syndicator, so it is worth reviewing the duties that a syndicator owes to them.

What Is a Real Estate Syndicate?

A real estate syndicate is a way to finance a project or development through private investors. While REITs typically invest in numerous real estate projects and ventures, a real estate syndicate usually exists to invest in a single project. The same group of investors may go on to invest in more projects together, but they would do so as a new syndicate.

Real estate syndicates in California are often established as limited partnerships (LPs), with the investors as limited partners and the syndicator as general partner. Under this type of business structure, the investors are shielded from liability, but cannot have a direct role in the real estate project. Other syndicates may form as limited liability companies (LLCs), in which the investors own the majority of the business, but leave management and operation to the syndicator.
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Author: Staff

Buying real estate is a risky venture for investors, with buyers betting on the property increasing in value or producing a revenue stream through rental. Buyers also take various chances regarding unknown defects in the property’s title, or defects in the property itself. Researching potential defects is a critical part of any California real estate investment. California law requires sellers of certain types of real estate to make a variety of disclosures to buyers, in the interest of giving prospective buyers as much relevant information as possible. Most of these disclosure rules apply to residential real property. Some investment properties, such as rental houses, are subject to residential real estate disclosure requirements. The sale of an apartment building with more than four dwelling units, however, is not necessarily subject to those rules. It is, however, subject to other disclosure requirements, including known defects or hazards, particularly environmental hazards. California also requires disclosure of certain earthquake risks.

Residential vs. Commercial Property

Residential properties, defined as properties with one to four dwelling units, are subject to a substantial number of disclosure requirements in California. Residential rental properties can appear to fall into both categories, since they are residential for tenants, but commercial for owners. Rental houses, duplexes, and other small structures generally fall under the “residential” category. Sellers must follow the residential disclosure guidelines, even if the buyer is another investor. Larger apartment buildings, on the other hand, are not necessarily subject to those requirements.

Common Law Disclosure Requirements

A 1963 decision by a California appellate court, Lingsch v. Savage, establishes that sellers of commercial property have a duty to disclose any facts known to them that “materially affect[] the value or desirability of the property.” Failure to do so with the intention of inducing someone to purchase a property can result in civil liability for fraud.
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Author: Staff

Ownership of real property in California includes various rights, along with a wide range of restrictions. The specific restrictions will vary from one location to another. Property owners may restrict the use of a piece of property by subsequent owners through restrictive covenants, which are included with the documents transferring title. Some restrictive covenants “run with the land,” meaning that they are binding on subsequent owners of the property. In planned residential developments, the covenants, conditions, and restrictions (CC&Rs) enforced by a homeowners’ association (HOA) include restrictive covenants affecting the use of individual properties. In relatively rare cases, the grantor of a property may set restrictions on the use of the property, resulting in loss of title by the grantee if they violate those restrictions. California real estate investors should carefully examine any possible restrictive covenants affecting property.

Public versus Private Restrictions

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Author: Staff

Ownership of real property includes certain exclusive rights. The owner of real property has the right to improve the land, such as by building a house or other structure. They also have the right to exclude other people from the property without permission. But these and other rights are subject to limitations. A property owner can make improvements to the property, provided the improvements do not violate local zoning ordinances. The right to exclude others from one’s property might be limited by easements attached to the property.

What is an Easement?

An easement is a nonpossessory interest in real property. That means that the owner of an easement does not have the right to actual possession of the property. California real estate investors should check the title history of a property carefully to look for easements.

Positive vs. Negative Easements

An easement can either give others the right to access portions of the property for limited purposes, known as a “positive easement;” or restrict certain uses of the property by the owner, known as a “negative easement.”

A positive easement is one that allows the easement owner to use some part of the property for a specific purpose. California law identifies various purposes for which property owners may grant easements, including:
– Passage over their land, known as a right-of-way;
– Hunting, fishing, or other recreation; and
– Obtaining “water, wood, minerals, and other things.”
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