Tuesday, October 22, 2013

THE SAGA OF TWO PROPERTIES

Well, if you have read my previous rants about The Flipping Formula then you know that I purchased  two properties at the training seminar in June 15, 2013 and had some ups and downs on various issues.

First was the delay in getting my funds transferred from my regular IRA account to the Self Directed IRA. That was my fault because I did not submit the proper form to the Thrift Savings Plan because I submitted the regular form instead of the special form that is required if you have already taken out a cash distribution. I originally wanted to leave some of the money in the original IRA, but the organization stated that I could not take out two partial distributions, I had to take it all out or none out. So that meant I had to redo the paperwork and take it all out and roll over to the new SDIRA. We finally got that squared away.

The money was transferred by wire to Horizon Trust, they sent the money to the escrow company and the properties finally closed about July 17 and 19. One house is in Illinois and one is in Missouri. But you will recall that I did not find out the houses closed until about 2 weeks after the fact, and in the meantime there was no insurance on at least one of the houses because the property manager had immediately cancelled the insurance when it closed escrow without informing me. Fortunately, there was no claim filed or I would have been in deep doodoo.

So I got the insurance purchased and set up (on a weekend—not an easy task) and the paperwork completed for the property managers who were managing each property. There were a number of missteps because one property manager kept trying to email the property management contract and I could never open the attachment because it did not show in the email. Finally that management firm mailed the copy to me. So much for the wonderful world of working with computers and the internet. 

After finally getting all the paperwork read, signed with witnesses and notarized I mailed the paperwork back to the management company. About 2 to 3 weeks later I was informed by one company that they would no longer be managing properties and that I had to get a new property management company. Maybe they decided that they were better at buying, fixing and flipping then at managing a rental property. In any case I had to get two new property management companies. One pass over went pretty well. The other one has not been so good.

One of the insurance companies informed me that they would not insure the property and I had to get a different insurance company. That was very disheartening and made me very concerned about the property that I had purchased. Something had to be gravely wrong for a company to refuse to insure the home. I got that squared away by hiring a new insurance company and getting the property inspected again.

I am still waiting to get a copy of the deed for one property and I have not gotten a proper accounting of what money was collected (I purchased both properties with tenants already in place). I finally got the first check deposited with Horizon Trust, the custodian company for the Self Directed Ira September 25, 2013.  Now, do you think I am being unreasonable when I complain that no payments were received until September 25 on two houses that closed July 17 and 19. Like I told one person, thank goodness I wasn’t paying a mortgage on top of everything else. I still don’t know what money was collected, what was spent (by the management companies and what was transferred over to the new property managers). (As of Oct 22, 2013 I just received some accounting info, but I am still confused because it does not show the tenant paying what I was expecting to receive.)

Then to make matters even worse, I think one payment by one company may have been incorrectly deposited to the wrong account at Horizon. (I just found out that payment was credited to the wrong property account. The clerk at Horizon stated that the wrong account number was written on the check. I am not sure how that how that happened, but at least we now know why the system did not show any payments received for the one address.)

Yesterday, I decided I should follow up with Horizon and the insurance to be sure that all the payments went through ok. I emailed the representative for the insurance company and was informed that they had e incorrectly used my yearly payment for the one house and split the payment between the two properties. This was necessary because when they got the second payment from Horizon, they did not know what properties it was for because it had been wired to them without an account number. So today we got that squared away so that the payments on the insurance were correctly credited to the right properties.

So the way things stand right now is as follows:
1)      Waiting for proper accounting of the money collected in July and August. (just got some info)
2)      Waiting for a copy of the settlement report on the other property.
3)      Waiting for the payments to go to Horizon.
4)      Waiting to hear back from Horizon on whether the payments were properly credited for the two properties.
Waiting, Waiting, Waiting. I guess I should just be grateful that I don’t have a mortgage on either property.

Ranting in Santee.

Sara 

Just a footnote: I guess I should tell you that I got a refund check from the insurance company from Liberty Insurance. I did not realize that when you buy the property through your IRA the property is "owned" by the custodial company. In this case, that company is Horizon Trust. When I set up the insurance policy with Liberty Insurance I told them that I was buying the property through my self directed IRA. Liberty told me that I had to get the policy in my name. So when Liberty sent the refund to me, I was not able to deposit it back to Horizon because Horizon considers the check a third party check. Liberty will not reissue the check because I am listed as the policy holder instead of Horizon (although Horizon was listed as the Mortgagee instead of the owner on  the policy.) So I am left with either just keeping the refund and not redepositing it back to the IRA, or sending it in as a contribution to the IRA. So, I guess my words of wisdom would be sure that the IRA custodian is listed as the "owner" not yourself. This makes me wonder what would have happened if we had to file a claim on the property with Liberty. Would they have denied the claim because the policy listed me as owner instead of Horizon? I guess it is a good thing that we didn't have to find out.



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