Case Studies #1...Little or no equity - Posted by Tyler

Posted by 3Dox on May 18, 1999 at 10:42:42:

Does anyone know if PacTrusts are legal in Louisiana? I haven’t found any attorneys who can answer the question simply…

Case Studies #1…Little or no equity - Posted by Tyler

Posted by Tyler on May 17, 1999 at 16:36:18:

Hello, all. I’ve got an idea for something we could do on this site, that I feel would be very beneficial for newbies and oldies alike…

My partner and I are in the process of trying to improve our business system, which entails one main focus: solving sellers problems, creating win-win solutions.

Any of us who have gotten calls from shotgun marketing efforts know that there are many situations come our way, yet most of them fall into a few categories…always with a few variables.

With the MANY different strategies and ways to create solutions for each situation, it can at times be overwhelming for an investor to become savvy on all.

I have found, however, if I can break down each “situation”, and create a list of “solutions” for it, I can streamline the process of consumating the deal based on the variables.


I’m hoping we could all participate in giving our own unique solutions to different case studies…based on the types of calls we all get reguarly.

In my business, I know that I find myself getting into one mindframe, and passing on deals, simply because the soution is not on the tip of my tongue, and I don’t have the time to refresh myself, or research on it. I’m sure that many of us (especially the rookies) find ourselves thinking, “I know I read a post a couple of months ago about what someone did with a deal like this, but I can’t remember, so…pass.”

So after saying all that (enough of the preface), here we go. I think we could really get something good going here…in a well orginized fashion.

We have the brain-power and experience on this site to come up with some very unique solutions that everyone could benefit from.

Let’s do it!

For the first one, I thought we’d discuss the calls I know a lot of us get these days: little or no equity. There’s really not a lot of variation in what we can do with these deals, but it’s a good start for discussion.

Here it is:

FMV- 100,000
balance 95,000
PITI payment is right around the average rent rate for the area
Good area of town

Seller needs out quick and may or may not be willing to Lease Option…need solution for both.

I hope all will participate…this site is full of phenomenal people, all with great experience to share.


Where’s the money? - Posted by Bud Branstetter

Posted by Bud Branstetter on May 18, 1999 at 08:20:23:

The costs to form and administor the trust on this hypothetical 100K property with little cash flow are going to come from where? and cost how much?

Re: Case Studies #1…Little or no equity - Posted by NevilleC

Posted by NevilleC on May 18, 1999 at 01:08:28:

Buy subject to, get the seller to reduce the principle by another 5K (realtor fees+ closing cost + seller expences) by getting a personal loan. These he would incure if he tried selling it via a realtor and would be making monthly payments; IF he got a FMV offer.
Then either L/O the property or sell it on a wrap with at least 5K down, preferably more, so that in the event of a default you have the resources to make the payments while you foreclose. For carring financing you would try to sell the house for about 10% abov FMV.

Re: Case Studies #1…Little or no equity - Posted by Reif

Posted by Reif on May 18, 1999 at 24:12:37:

I agree with Mark. The seller better not be expecting any money out of this deal. If he is, this needs to wait until he’s motivated.

I’m probably not as tough as most here (I’m still a newbie) so I would offer an L/O for the mortgage balance at closing (a year from now or whenever) at a rent of his PITI.

Collect 2-3K option money, 50-100 bucks/mo. on the spread, and 5-10K on the back end.

Not an awesome deal, but not bad for no risk.

As Bronchick says, better than swinging a hammer.


Re: Case Studies #1…Little or no equity - Posted by Brad Crouch

Posted by Brad Crouch on May 17, 1999 at 18:57:39:

Put it in a PACTrust. Sell the “bundle of rights” to the resident beneficiary, along with the tax write offs (interest & property taxes). Which makes the monthly payments from the tenant, higher.

After three or four years (all the time receiving a monthly “spread”), sell the property at FMV, pay off the underlying loan and split the principal reduction and any appreciation that may have occured, with the resident beneficiary.

Of course, the seller gets any equity he started out with, first.


Re: Case Studies #1…Little or no equity - Posted by Mark R in KCMO

Posted by Mark R in KCMO on May 17, 1999 at 18:45:06:


Answer # 1 PASS

There is no indication that the seller is motivated.

Answer # 2 Subsidize my purchase and take the deed.

I can take care of this problem for you and it will cost less than you are paying now we’ll write a note you only have to make up $200 per month for the next 10 years. Mr/Ms Seller, There is only one way that I can help you.

Re: Case Studies #1…Little or no equity - Posted by Bassman

Posted by Bassman on May 17, 1999 at 18:27:33:

Take property "subject to " no money to seller .
Sell for 110-115k , 15-20k Down , and be done with it.
Just my thoughts

I am surprised… - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on May 18, 1999 at 10:41:16:

that you are assuming seller has 1) willingness to pay his way out with $5K, and 2) ability to borrow or otherwise come up with the chunk of money.

For a lot of people in that position if they are about to move or have already moved out, the foreclosure is breathing down their neck. Not all but most of them have no funds to pay their way out. At best they might entertain Mark’s idea of subsidizing for a certain period of time, but most likely they’ll just walk away and the bank will get the home.

My last 3 callers were in this very situation, on average 3 months behind in payments with no money and/or desire to cure.

Re: Case Studies #1…Little or no equity - Posted by Marg

Posted by Marg on May 17, 1999 at 23:09:11:

Where do you find out information on the PACTrust, and is it available to all states? Thanks

Re: I am surprised… - Posted by NevilleC

Posted by NevilleC on May 18, 1999 at 23:16:10:

Oh my. I am the one who is surprised. 1st. and foremost, unless I am mistaken, we are talking strategy here. Strategies for the tool kit is the intent of the posting, and a good idea too might I add. I for one do not assume anything. I like to size up the situation from what the seller tells me and then dip into my tool kit to try to slove their problem. Ane the more strategies i have the more problems I could solve.

I do not see any referance to a foreclosure situation in the posting or that the sellers are in financial straits. That is your assumtion and interpretation. I have often encountered sellers who are a couple of years into their house and for one of many reasons are now having to sell it. Does that mean that they are broke? Is that enough time for the house to have appreciated considerably that they could cover their selling costs? It cloud be a slow time of the year to sell or a slow market. Deals are made all the time for umteen reasons and not just because of financial straits.

Re: Case Studies #1…Little or no equity - Posted by Brad Crouch

Posted by Brad Crouch on May 18, 1999 at 11:05:10:


Click on the “Cal-Equity” banner at the top of the main neswgroup page.