Posted by Ken-Orlando on March 28, 2006 at 22:48:29:
In a State like Florida or Illinois you could have the contractor put the property in a Land Trust and then assign to you the beneficial interest when you close. In Florida it takes one doc stamp. When you sell the property just assign the beneficial interest. Your buyer will probably have to take the property out of trust to get financing, but that should avoid the seasoning issue.
Creative way to avoid seasoning issue & xfers - Posted by Robbie
Posted by Robbie on March 28, 2006 at 19:50:35:
I’m buying a house from a contractor of mine. In my state, transfer taxes are 3%. I’d like to do a quick rehab and re-sell to an owner-occupant. I’d rather avoid the transfers and eliminate any possible seasoning problem with my buyer’s lender.
Here’s what I’m thinking: Keep the house in the contractor’s name. Give him some money up front, but keep the title and the first mortgage in his name. Renovate (his) house. He sells to the eventual buyer, I get all the remaining proceeds. To protect my investment (since the house remains in his name), I create and record a second mortgage to cover my entire investment and profit (including the money I give to the contractor, my repair costs, holding costs, etc.).
When the work is done, the owner/contractor can’t cut me out…I have a second mortgage recorded. Seasoning is not an issue…he’s been on title for years. I get my profit (and all expenses) reimbursed directly on a HUD-1 as a mortgage payoff. (I can readily argue that I am, in effect, lending him the money for the repairs, etc. and I’m the one who specifies what the cost of repairs was.)
What do you think? Wouldn’t this work? How can I do this better?
Thanks.
Re: Creative way to avoid seasoning i - Posted by The Frisco Kid
Posted by The Frisco Kid on March 30, 2006 at 06:16:02:
Robbie
Forgot to add the buyout of the option can be done with a secured note and thus show on the HUD-1 and be paid off when the property sells along with your loan note and trust deed.
Re: Creative way to avoid seasoning i - Posted by The Frisco Kid
Posted by The Frisco Kid on March 30, 2006 at 06:06:32:
Robbie
In the states I’ve done business in, there is the danger of the seller claiming a usuarious loan and cutting you out. After all if you put out say $10k cash and you cover it with say a $30k note and trust deed you don’t have much ammo to sway a judge of wrong doing unless your an exempt lender.
You may trust this guy but the years have exposed me to all kinds of people that aren’t what they appear to be when cash is on the line.
If it were me I would loan the repair money at a legal interest rate, secured as you said but I would cover my profit with an option and a agreement that the seller can buy out the option for your profit amount.
Re: Creative way to avoid seasoning… - Posted by Ken-Orlando
Posted by Ken-Orlando on March 28, 2006 at 22:32:54:
Here’s an idea. Set up a new corporation to take title at close. Then sell the corporate stock to your buyer.