MacFarlane Real Estate, Inc.

Do you own a real estate investment?  Are you in default on your loan?  Be aware that most lenders have a clause in the loan documents that allows for an absolute assignment of rents when the borrow is in default.  The lender files a Notice of Default and then, the lender intercepts the rents before the owner of record can collect.  If the owner tries to interfere, the owner could be liable for the attorney’s fees to get an injunction against the owner collecting rents.

The typical clause is as follows:  “In the event of a default, lender shall be entitled to accelerate all sums due under the loan secured by deed of trust and is authorized to enter into and upon the property for the purposes of collecting the rents, issues and profits from the property.”

At MacFarlane Real Estate, we often take control of a property before the trustee sale (foreclosure).  Basically, once the Notice of Default is filed, MacFarlane Real Estate seizes the rental income for our hard money clients.  At this point, the borrower has to make up the payments owed without help from the rental income.

The housing market is tough for sellers.  Foreclosed properties are piling up and banks need to discount the properities in order to sell.  Lets face it, if you want to sell today…  you have to sell at a bargain. 

Many homeowners don’t realize that there is a boom in the rental market.  Thats right!  Every foreclosure produces another tenant.  First time buyers that would normally buy a house…  are waiting.  Thats more renters!  Vacancies in Los Angeles for RESIDENTIAL properties are low.  So, why not turn your house into an investment?

There are a number of benefits to renting your home.  Rent can often cover the mortgage until the housing market returns.  You can report losses against your income.  Historically, rental properties have been one of the best investments.  After all, where else are you going to invest?  Atleast you know your house is not a Madoff Ponzi scheme!  You can always move back into the house in the future. 

What are the drawbacks of renting your home?  You must first prepare yourself to rent out your home.  It is now an income property.  Tenants probably aren’t going to care for the property the same way you did.  That is okay as long as you have an adequate security deposit.  Are you ready for calls at midnight from your tenant?  If not, you probably want professional management. 

Landlords must also prepare the home for a renter.  The heater must work.  Proper smoke detectors must be installed.  Trip and fall hazards should be removed.  The house should be empty and clean.  Insurance may be an issue.  A call to your insurance agent is a must! 

The big issue is LAWSUITS.  There are a number of ways landlords get sued.  Discrimination, mold, trip and fall hazards, etc…  My suggestion is to hire professional management.  For approximately $150 per month, a professional management company should prevent many of the potential lawsuit scenarios and take care of the midnight maintenance call. 

MacFarlane Real Estate, Inc. is always looking for new clients!  Give us a call to discuss renting your house.

First, this is not a football term.  In the legal universe, a receiver can be appointed by a government regulator pursuant to a statute, appointed by a court or appointed privately.  Under a receivership, the receiver undertakes custodial responsibility over another’s property, assets and rights.  The extent of the receiver’s duties and powers are stated in the appointment documents, be it a court order, a statute or private agreement.  Receiverships are most commonly utilized for: interim corporate management, marital dissolutions, fraudulent transfers, criminal profiteering, white collar crime and real property disputes.

The receiver is a neutral third party many times playing an interim role while a separate (likely underlying) dispute is resolved.  In the case of real property, receiverships are common and necessary.  Typically, when dealing with real property, the receiver is appointed by a court based on a property dispute that has reached the court system (i.e. health and safety code violations, foreclosure proceedings).

For instance, if an apartment owner is found to be in violation of health and safety codes and a court is convinced the apartment owner is not capable of solving the underlying problem on his/her own, a receiver may be appointed to take over the property.  While the property is under receivership, the receiver will oversee and coordinate rent collection, carry out maintenance and repairs to bring the property up to code with respect to the applicable health and safety laws and in doing so potentially secure an additional loan on the subject property to finance the required maintenance and repairs.  The receiver will typically hire a property management company under these facts.

The receiver, in the above example, does not work for the owner of the property nor does it work for the tenants or the tenants’ advocates.  The receiver is a neutral third party carrying out duties bestowed upon him/her by the court pursuant to a court order.  The receiver is a fiduciary and officer of the court and must oversee the property and assets according to the court’s directives.  The receiver will be obligated to report back to the court through comprehensive reports detailing the budget, progress, projections and goals.  Once the receiver completes the objectives of the court’s order and files a final report reflecting such, the receivership will be dismissed and the receiver shall be discharged from his/her duties.

Of course, an apartment owner’s main source of monthly income generated from the property will be rent collection. However, there are alternative ways to generate additional income that may just transform your investment from a “break-even” asset to a profitable one.

Laundry Income

Laundry machines on site will consistently drive more dollars per month to your investment. There are a handful of competitive and proven laundry companies that will not only service the machines and collect coins–but they will also provide the machines themselves and possibly pay you “door money” (dollar amount per unit) to sweeten the deal. Of course, these companies have to make their money as well. Typically, the laundry company has several profit-sharing plans it will offer depending on the size of the building.

Cell Tower Licensing

Another avenue for additional income is the issuing of a license or lease for a cellular tower to be placed on the property of an apartment or commercial building. The space consumed could be as small as 10′ by 10′. As we all know, cell phones are not going away and the required cell phone towers need a place to hunker down. Depending on the cellular company, it is not uncommon to receive an additional $750 to $1000 per month for the placement of a cell phone tower at a property.

For a reasonable monthly fee, a property owner can hand over all the headaches of self-managing their investment property to a property management company.  However, unless you do your homework, you may end up creating more headaches (and losing money) if the wrong property management company is hired.  Below I have provided a general list of responsibilities a competent property management company should handle.  Of course, make sure to inquire whether all tasks will be covered under one monthly fee or if additional fees will be incurred per task.

1. Advertise/Show/Lease Vacancies

2. Perform Tenant Screening (credit checks, eviction history, etc.)

3. Collect/Deposit Rents Monthly

4. Communicate with Tenants Exclusively and Directly

5. Serve Notices (i.e. 24 hour notices to enter, 3-day notices to pay rent or quit, 30-day change of terms)

6. Commence and Assist with Evictions/Unlawful Detainer Proceedings

7. Maintain and Repair Property

8. Maintain and Monitor Property Account

9. Maintain and Pay Property Bills, Mortgages, Taxes, etc.

10. Provide Monthly Financial Statements Detailing all Income/Expense

11. 24-Hour Emergency Line for Tenants