The agreement for sale is a great way to get this done and give both buyer and seller peace of mind.  Although the agreement for sale is one of my favorite vehicles for alternative financing there are a few things you need to be aware of.  If you are the seller helping a buyer purchase your home through an agreement for sale you are going to stay in “Fee Title” to the property.  This means that you will be the title holder until the agreement is fulfilled. The buyer will get what is called “Equitable Title” on the property.  This equity is the difference between what is owed on the property and what the sales price is, not the value of the home minus what is owed. I am making this clear because the more equity your buyer has in the property the harder and longer the process is to get the property back. .  The time periods vary from 30 to 180 days according to the amount of Equity the Buyer has accrued based on the sale price and remaining balance, less than 20% – 30 days, 20% to less than 30% – 60 days, 30% to less than 50% – 120 days, more than 50% – nine months.  You should be sure to check with an attorney on the amounts and time lines this type of alternative financing requires. Let’s also keep in mind that our friend Frank Dodd says we cannot originate more than three loans a year without an originators license.

You cannot charge fees to the buyer for financing through an agreement for sale or you may have the government knocking at your door to see your licensing.   It is similar to a hard money or private financing loan with a note and deed of trust.  Let’s always keep to the cardinal rule of investing in mind,  “don’t get Greedy and don’t get into trouble” This is your business so follow the rules!

Now that I have all but scared you away from the Agreement for Sale let’s talk about the good side. The Forfeiture feature on an Agreement for Sale can be very attractive to the investor because it is much faster, in most cases, than foreclosing a Deed of Trust which is a 90 day waiting period.

With the agreement for sale you can write whatever terms you want and keep as much control as you want (well, as much control as both parties “agree” to). You can use an agreement for sale to wrap an underlying lien.  There are three types of loans that cannot be “wrapped”, the first is the FHA which can never be wrapped.  Line of credit loans should never be wrapped and VA loans can only be wrapped when using an agreement for sale.  Just go on line and Google “Agreement for sale, Arizona” for more specific details.  (In some states it is called “contract for deed”).  Basically in this market alternative financing is an excellent way to go……just please be sure you read up on the Frank Dodd guidelines and the different types of financing and documents that will give you  the greatest return on your investment.

The Arizona Usury laws cap interest rates for financing at 10% unless a different rate is contracted for in writing, in which event ANY rate of interest may be agreed to by the parties. So, that being said, if the payment fits your buyers needs and both parties agree to whatever interest rate you are applying you can have a lot better return on your money.  Once it is set up just sit back and let your servicing company collect the money for you and keep track of the payments and interest.  You can also have the taxes and H.O.A. payment included to insure payments are being made properly.

Please be sure, as always, to work with an escrow officer who is familiar with these types of transactions.  Your title company can prepare the documents for you as a part of their escrow services.

1-      Photos- I once heard that a person’s perception is reality to that individual. This means if a prospective tenant sees a photo of a home taken at a bad angle or with poor lighting, they may think it is not great home. If they see a semi dirty bathroom or a toilet seat up, they may move on to the next rental not because it is priced too high, but because they are turned off by the presentation. Photos used to rent a home, should be of quality that they could be used to sell a home.

2-      Build a relationship with tenants- My dad once told me this; “people say money makes the world go round. That is inaccurate; it’s relationships that make the world go round.” Too often because of experiences with bad or flaky people, one can become complacent in their interactions with tenants. Remember they are PEOPLE and they deserve respect too. Remembering their name, returning phone calls within a timely manner and getting to know them with the right questions will build that relationship. Let’s face it, while businesses will often work with others who give them good deals, they would rather work with someone they like and will often help them out. The same goes for tenants; if you create a strong, respectful, professional relationship with them, they are more likely to be responsible because they like you. Let’s face it, creating and maintaining relationships IS marketing.

3-      Spread the word- If you jump into a lake you may not see how far the ripples go… Too often we forget how small the world is and how connections open up opportunities. If you ask everyone you know and everyone you meet, it is amazing how your needs will be met. The best tenants I have came from referrals from those I already know. Although this may not always be the case, letting others know you are looking for a tenant will either draw them to you more quickly, or attract the best tenant.

In short, increasing the marketing efforts will create faster turnaround with greater results in this highly competitive rental market.

The first thing I always ask is whether the tenant’s rent is current.  Many tenants, when breaching their lease, attempt to use their deposit as their last months rent.  Unless permitted in the lease, this is not appropriate.  Also, since it’s not technically the last month of the lease, the deposit shouldn’t be applied anyways.  Therefore, if the tenant has not paid the rent, the landlord should immediately give a non-payment of rent notice if the rent is late.

Clients often argue that it’s not worth their time to serve the notice and file the eviction since the tenant is leaving at the end of the month.  Such arguments miss two important points.  First, an eviction is a quick, inexpensive means of getting a judgment against the tenant which can then be collected on.  While you don’t get future rent owed, you do get a judgment for rent for that month.  Second, even though he told you he was moving, it’s possible that the tenant will not vacate or deliver the keys to you.  If the end of the month comes, and the landlord hasn’t filed an eviction, the tenant could fail to vacate. This would cost the landlord an additional month’s rent.  As we always advise clients, a landlord should always serve a five day notice as soon as the tenant is late in rent to protect her interest.

On the other hand, if the tenant is current in the rent, there is nothing that a landlord can do to protect against the potential breach by the tenant.  However, that doesn’t mean that the landlord has nothing to do.  Upon being notified that the tenant will be vacating, the landlord should begin to market the unit.  The landlord should go through the same process that they would regularly to re-rent the premises.

Once the tenant has vacated, then the landlord must fulfill their legal obligations in regards to the security deposit under A.R.S. § 33-1321.  The landlord has 14 business days to account for the deposit and show what amounts remain owing by the tenant.  In this case, the tenant would be liable for damage to the unit and for rent through the remainder of the lease.  However, the landlord has a duty to “mitigate” her damages and make best efforts to re-rent the unit.  A landlord has to show that she attempted to rent the property using her normal procedures.  If, despite the attempt to rent the property, the property remains vacant, the tenant is liable through the remainder of the lease.  If the landlord is able to re-rent the premises, the tenant is only liable for the time the property was vacant.  In such cases where the property is re-rented before the original lease expires, the landlord must send a revised security deposit accounting, reflecting the lower amount owed by the tenant.  It is based upon this revised accounting that the landlord can sue the tenant for breach of the lease.

Answer:  I can’t tell you whether or not you should rent to a specific person, but I can warn you of the potential problems that bankruptcy can present for a landlord.  Specifically, if a tenant is in bankruptcy, by law they receive the protections of 11 U.S.C. § 362, which creates an automatic stay prohibiting any actions against the tenant.  This means that if the tenant is in bankruptcy, and fails to pay rent or otherwise breaches his lease, the landlord can not immediately serve a notice and file an eviction.  The landlord must enter into the bankruptcy proceedings and seek a “lift stay order” which permits the landlord to pursue the eviction.  Unless the landlord gets permission from the court, the landlord will be liable to the tenant for filing an eviction in violation of the automatic stay.  It can often cost several thousand dollars and several weeks or months to obtain a lift stay order.  Of course, if the tenant always pays rent and is complaint with the lease, this may never be an issue, but if they breach the lease, the bankruptcy will create problems for the landlord.

Information contained in this post is for informational purposes only and should not be considered legal advice. You should always contact an attorney for legal advice and not rely on information published here.

We’ve all heard the dictum about the dangers and risks associated with putting all our eggs in one basket so many times that you would think when it came to real estate investment few sane people would want to place all their investment in a single-family property.

Yet many of the people I meet in the courses I run have exactly this kind of approach which shows, perhaps, just how powerful market conditioning can be. Most of the real estate moguls we get to hear about tend to be single-family property types (with the exception perhaps of Donald Trump who has taken the eggs in the basket dictum very much into account in everything he has done) and this tends to brainwash us into thinking that either this is the only type of real estate investment available to us or that this is the only type of real estate investment there is.

The truth is that investing in multi-family properties spreads the risk of your investment without drastically increasing the costs and, in addition, allows you to create a built-in buffer against an apartment or two going vacant at some point (which is always a risk you need to be prepared for).

With a single-family property should the tenant’s personal circumstances change you may well find yourself missing out on a couple of months of income which is enough to wipe out your profit from that property for the year. The risk of this is spread thin with a multi-family property however where a tenant or two moving out does not affect your monthly income from the building enough to seriously jeopardize your annual profit and that is one of the beauties of investing in multi-family properties.

Couple it to the fact that thanks to popular misconception you are competing with fewer other real estate investors for the choicest properties than if you were active in the single-family home market. This is not to say that you should develop a mindset which specifically looks at multi-family properties to the exclusion of everything else.

Far from it. Good business is where you find it and as a real estate investor who has bought single-family homes to flip (indeed I started out my career in real estate investing with a single-family home) I can tell you that if you come across a good deal or need to buy a property to flip quickly so you can invest in an apartment block you should never overlook the possibilities offered by the single-family property, much as you leverage multi-family ones in order to build up a portfolio that will guarantee you never have to work to around another schedule ever again.

Having nice amenities at your multi-family properties brings customers.  Amenities also make living at your property pleasant and a joy to come home to.  They help with the original leasing and with resident retention. It makes sense to add amenities that are related to the lifestyles of your tenants.  Have little extras that they can appreciate every day.  This will keep their enjoyment of their condo or apartment in their minds at all times.

One idea is to set up home docking stations for electronics in all the units.  This makes the residents’ lives easier.  They have a convenient place to plug in all their personal electronics, such as cell phones and iPods.  It is a great improvement to the apartment or condo.  Yet, it is a relatively inexpensive amenity compared to some others you might add.

Most people these days worry to some extent about identity theft and other forms of fraud.  They want to protect their personal information.  If you make a paper shredder available to residents, you will have an amenity they will all appreciate.  Then, you can recycle the paper to help the environment.  This also goes a long way to impress many residents.

Any amenity that says “This is what our community is all about,” is an amazing tool.  Have a special facility on your property that reflects the interests of the residents.  If your residents are into movies, you could have a theater, for example.  A boxing ring for sports lovers would work well, too.

If you are trying to sell customers on a property some might see as less than perfect, you need to find a way to make your amenities shine.  What may seem like something that is not up to par can be enhanced until it is something extraordinary. Take for example a small swimming pool.  If you jazz it up, it will seem like a special and exotic retreat.  Put some potted plants around it to give it atmosphere.  Do not use the ordinary ho-hum pool furniture. Make it something special that gives the pool the ambiance of a sidewalk café in Italy.  Give the area around the pool an environment suited to social mingling.  You can make the pool a central hub of activity in your community.

Making payments is one concern of all apartment and condo owners.  They need to have a method to make their lives easier when it comes to financial concerns.  Most properties accept Visa and MasterCard.  However, many people have American Express. These people consider it a very helpful amenity if you accept American Express.  Condo buyers can even put their down payment on this card.  They may have a chance to earn points on the card to get a fantastic reward, such as plane tickets for a vacation.

Change your property in a big way, or change it in a minor way.  As long as the effect is spectacular, the cost will not matter.  What does matter is how your residents and prospective residents respond to the amenities you offer them.

With that in mind, I thought I would give you a little information on when your 2011 federal income tax return is due. As you’re likely aware, the filing deadline is “normally” April 15th of each year. But when the deadline falls on a weekend, it’s pushed to the following Monday. And when the deadline falls on a federal holiday, it’s pushed to the next business.

This year, like last year is one of those exceptional cases when it comes to your tax return deadlines.  This time around, April 15th falls on a Sunday, and Monday is not a federal holiday. And yet, your taxes are due on Tuesday, April 17th. Why?

The funny date is due to a April 16th being Emancipation Day, which is a holiday in Washington, D.C. Emancipation Day marks the anniversary of the signing of the Compensated Emancipation Act by President Lincoln in 1862, which freed the slaves in the District of Columbia.

Emancipation Day has been an official public holiday in D.C. since 2005, and it’s been responsible for shifting the 2006 and 2010 tax filing deadlines (in 2007 and 2011, respectively).

Additionally, you also  get one more day than you might otherwise think this year — 2012 is a Leap Year, which means that February has an extra day. So what is the moral of this story?   No one has any excuses for missing the tax filing deadline this time around!

I have never been a proponent of laws to address what are clearly short term problems mainly because of unintended consequences when the “short term” law is no longer needed. As you know, laws are almost never removed from the books. Much of the proposed legislation to “deal with” or “help homeowners” in foreclosures unfortunately falls into the category of short term need. Once our market returns to normal what happens to all these laws and the burden many of the proposed laws would place on the free market.

Some proposed legislation would actually force investors to do things that just a few years ago were seriously frowned upon by many government agencies. One example of this is to require the investor to rent property back to the previous owner for at least one year. All the reasons it was a problem before the foreclosure crisis just mysteriously vanished with short term changes in the market place. Not to mention that the new owner may not want to be a landlord or the obvious intrusion on private property rights that is the foundation of capitalism and free markets.

There is no question that the foreclosure crisis is real and has impacted a huge number of families in our state. I am sure, like me, you have friends that have been impacted by foreclosure. I realize every situation is different, but in the cases I know about that went through foreclosure all were put through the proverbial wringer throughout the drawn out process. All said they wish the process would have been clear cut. No on again off again trustee sale. No living in doubt every month wondering if this is the month they have to move. In every case it would have saved them money, reduce the stress immensely and helped them get back on their feet sooner if the foreclosure just would have happened as if this was a normal market.

There is also no question that we are working our way through the distressed inventory. Some project that we could return to nearly normal levels by the end of the year especially in the lower price ranges. We are already starting to see investors respond to market needs by financing the sale of the property and fulfilling the role that traditional lenders won’t. We are seeing the concern many municipalities had of too many rental properties seriously impacting neighborhood didn’t happen and that rental properties are starting to convert back to owner occupied through seller financing. Prices are rising. As prices rise current homeowners are finding they are less underwater than they were. Prices have a long way to go, but market forces are certainly in play. Everything is moving in the right direction.

Is it best to let the market work and get through this period faster or should government continue to interfere with the side effect of delaying the return to normalcy? I believe there is validity to both. Wanting to let the market work doesn’t mean you don’t have a heart. Just like wanting the government to intervene doesn’t mean you want to prolong the housing recovery. Part of the problem is we have been caught in the middle with trying to do both.

One of the first lessons learned in business is to make a decision and then focus on implementation. I read once that almost every decision is the correct one. It is effective implementation that ultimately makes the decision right or lack of effective implementation that makes the decision wrong. I think it is safe to say that lack of implementation has been a consistent theme of the government programs in the foreclosure space.

Whatever happens, as investors we will adjust – we always do. It is up to you to stay up to date on the changing investment climate and figure out how to respond.

Smarter investing,

Alan Langston

It is often said that Arizona is a “cure” state in terms of non-payment of rent.  This means that if the tenant offers the full amount of monies owed, then the landlord has to accept the funds, until the judgment has been signed.  This language is codified in A.R.S. § 33-1368(B).  It provides that if, before an eviction is filed, the tenant may reinstate the lease by paying all past due rent and a reasonable late fee provided by contract.  After the eviction is filed, the tenant may still reinstate the lease by paying all the past due rent, a reasonable late fee, court costs and attorneys’ fees as provided in the written lease.  If the full amount owing is offered to the landlord, then the landlord has no choice and MUST accept the payment of the rent and allow the tenant to reinstate their lease.  Once the payment is made, the eviction must be dismissed, and the tenant is allowed to continue as if no breach ever occurred.

Often, tenants will come to court with certified funds or cash and present this to the Court.  If the full amount is offered, including court cost and attorneys’ fees, then the Court will order the attorney or representative to accept the funds and dismiss the case.  Even if the landlord no longer wants this tenant in the property because they are late every month, the landlord will have to accept the funds and dismiss.  In my practice, I regularly file evictions against a handful of tenants, who always pay rent late but will “cure” the breach and get the case dismissed by paying at court.

A landlord does not have to accept an offer of a partial payment from their tenant.  Under A.R.S. § 33-1371, a landlord that accepts a partial payment is prohibited from proceeding with an eviction in that month unless they obtained a written payment plan signed by the tenant.  This does not mean that a landlord has to accept a partial payment.  A landlord always has the right to refuse money unless it is the full amount.  This statute simply states that if a landlord chooses to accept a partial payment, they must get a written payment plan outlining the parties’ rights.

After a judgment has been entered, however, the landlord’s rights change significantly.  A.R.S. § 33-1368(B) provides that after a judgment in a special detainer has been entered for the landlord, “any reinstatement of the rental agreement is solely in the discretion of the landlord.”  Once judgment is signed, the lease is terminated and the landlord has the choice to allow the tenant to stay or to evict the tenant even if the tenant pays.  We strongly suggest, however, that if a landlord is going to accept the rent and still evict the tenant, that they get the tenant to sign a document acknowledging that the tenant is paying the money only to satisfy the monetary portion of the judgment, and that they still have to vacate.  This will ensure that the landlord doesn’t have any problems when the constable goes to execute the writ, and the tenant can show a payment to the landlord.  If the tenant refuses to sign acknowledging they are to vacate, then do not accept the money until after the writ has been executed.

A: While the courts have not given a definitive answer on this in the context of a landlord-tenant relationship, there are very good arguments why service by email is sufficient if your tenant responds to the email.  The Arizona Residential Landlord Tenant Act provides that a person receives notice if it is hand delivered or sent via certified mail.  These present irrefutable evidence that the person received the notice.  (This is true even if the person does not pick up the certified mailing – it is legally deemed received five days after mailing.)  A.R.S. § 33-1310 also provides that a person receives notice if they have “actual knowledge” or when it comes to the persons attention.  Therefore, if you send the notice via email, and the tenant sends a response, such response may demonstrate that they had actual notice and therefore you need not hand deliver or certify mail the notice.  For further support, if you are intending to make email service a standard of practice in your rentals, I suggest modifying your lease to include the following: “the parties agree that Notice may be given to each party by email to the email address above, or as changed in writing; such email Notice is reasonably calculated to inform the other party in the ordinary course and such Notice shall be deemed received on the date the email is confirmed, or one calendar day after being sent, whichever is earlier.”  This mirrors some of the relevant language in A.R.S. § 33-1310.

Please remember, to get that conclusive presumption that the notice was received, it is always better to hand deliver or certify mail the notice to avoid needless arguments from your tenants.

Information contained in this post is for informational purposes only and should not be considered legal advice. You should always contact an attorney for legal advice and not rely on information published here.