Property Co-Ownership Could Spell Difficulty
QUESTION: My brother and I own a 24-acre parcel of land. We have owned this land for about five years, and he wants to sell.
But I think we should wait until a new highway opens up nearby in about three years. My brother is going through a divorce and he isn’t thinking straight. He’s threatening to hire a lawyer to bring a lawsuit.
But I think dividing the property would greatly cut its market value. What do you advise I do?
ANSWER: Unless you can buy out your brother’s interest in the land or convince him to hold on to the property for a few more years, he can bring a partition lawsuit to either force a physical division of the land or force a sale.
Your situation shows why it is critical for property co-owners to agree on their plans for a property before they acquire it together.
Without an agreement with your brother, if he brings a partition lawsuit, the court will make the decision for you. Please consult a real estate attorney for further details.
No Limits to Number of Joint-Tenant Owners
Q: Is there any limit to the number of joint tenancy owners? I ask because my parents, my husband and I want to invest in a property together. Can we all be joint tenants?
A: Yes. There is no limit to the number of joint tenants with right of survivorship who can own a property together. Ask your attorney to explain further.
OK to Use a Fictitious Name on a Title?
Q: About six months ago, you answered a question from an investor in a small town about the best way to hold title to real estate when the owner doesn’t want his name on the public records.
You suggested using a trust arrangement with a local bank. But I can’t find a bank with a trust department that will hold title to real estate unless I move all my accounts to that bank. My lawyer suggests holding title under a fictitious business name. What do you think of this idea?
A: Not bad. However, check with your local tax assessor because such a title transfer might cause a reassessment for real estate tax purposes.
Rooming House Isn’t the Best Investment
Q: I have been looking at a nearby rooming house that is for sale. My wife thinks it would be ideal for us, as she is home during the day and can easily manage this five-bedroom house. What do you think of this idea for our first real estate investment?
A: Not much. A rooming house is a business, much like a hotel, motel or bed and breakfast inn. It is only secondarily a real estate investment. If you are looking for a full-time business, go ahead but don’t say I didn’t warn you. A better real estate investment would be a single-family home or perhaps a duplex or triplex.
Triple-Net Lease Can Help Landlord
Q: About a year ago, I inherited my mother’s home in a distant city. I rented it to a friend who recently moved out. As I want to keep it because I might want to move into the house someday, I don’t want to sell. But the house has been vacant two months and it is very difficult for me to rent and manage from a distance.
A neighbor offered me $500 per month if I rent it to her for five years. This is about $300 per month below the “going rate,” but the neighbor will take care of all management, taxes and maintenance. What do you think of this idea?
A: The situation you describe is called a “triple net lease.” This type of lease is widely used for commercial leases by major tenants such as K mart, Seven-11, Safeway and other top quality tenants.
Although I realize your neighbor isn’t quite so reliable, her offer is very attractive. To ease your rent collection, I suggest you insist on receiving a year’s post-dated checks in advance so you can deposit them on the first day of each month. That’s how I pay my triple net lease landlords and it works very well for everyone.
You Can Ask Buyer to Pay Title Insurance
Q: In the area where I am selling my large apartment building, it is customary for the seller to provide a title insurance policy for the buyer. However, this will cost several thousand dollars. Is it legal for me to require the buyer to provide their own title insurance policy?
A: Of course. Everything is negotiable in real estate. If you don’t want to pay for the title insurance policy which the seller customarily buys in your area, you can counteroffer that the buyer will pay for title insurance.
However, please think very carefully before you do that. If the purchase offer is a good one which is otherwise acceptable, it would be foolish for you to lose the benefits just because you are stubborn and want to save a few thousand dollars.
Investor Recommends Owning Parking Lots
Q: I enjoy your articles about real estate investments. However, I would like to make a suggestion that your investors look into buying parking lots. I’ve been doing this for almost 10 years and find it the best realty investment. I look for run-down old buildings near downtown.
After I buy or lease the property, I tear down the structure, pave the lot, and charge a few dollars for all-day parking. Virtually the only work is emptying the money box. But the real bonus comes when I sell the lots in a few years at handsome profits to developers who construct buildings. Why don’t you ever mention parking lots as investments?
A: Thank you for sharing your investment. I can’t recall anyone ever writing to ask about parking lot investments, so I haven’t had the opportunity to discuss them. Frankly, I am not familiar with parking lots, other than as a customer, but I appreciate your sharing your insight.
Master Lease Answer to Managing Problem
Q: About five years ago, I inherited a slum apartment building. It is very profitable but also a pain to manage. I don’t really want to sell, but I haven’t been able to hire a good property manager to relieve me of the management burden. Any ideas?
A: Yes. Master lease the building to a reputable operator of similar properties in your town. Almost every town has individuals who successfully operate these buildings. Talk with commercial real estate brokers who can refer you to these people. They are not property managers but, rather, entrepreneurs who can take over your building’s operation, including both its renting and the maintenance. In other words, you will receive a net check each month without having to worry about management.
Run-Down Properties Often Best Investments
Q: What do you think are the best real estate opportunities today? I ask because I have almost $50,000 to invest but am undecided about what type of real estate would be best for me to earn a profit in the next few years. Do you think foreclosure properties would be a smart investment?
A: I think the best real estate opportunities are offered by the run-down fix-up properties. These may be foreclosure or distress properties. Or they can be older properties that haven’t been well-maintained by their owners.
By purchasing at below-market prices and making profitable improvements, especially painting, cleaning and repair work, you can often add $2 of increased market value for each $1 spent on upgrading. Letters and comments to Robert J. Bruss, a San Francisco-area lawyer, author and real estate broker, may be sent him at P.O. Box 280038, San Francisco 94128.
