Re: The PACTrust point of view - Posted by Bill Gatten
Posted by Bill Gatten on February 02, 2000 at 16:32:41:
Sigh…this would be a perfect PACTrust transaction.
Remember: Paying $2,400 per month in rent is like making a house payment of one-third that amount ($1,600 per-month: assuming, say, a 28% Fed. and 6% state tax bracket). If you can afford as much as $2,000 in rent, then (for all practical purposes) you can afford a house payment of approximately $3,000. The after tax is the same either way (assuming you’re not hiding major sources of income from the IRS).
Why not offer the good Doc MORE rent than he’s asking? Say $2,500 p/mo. to cover PITI…that’s far less after tax than $2,000 in just rent. Then agree that if he’ll put the property into a land trust and make you a co-beneficiary (he’ll like the trust remaining in his name) that you’ll also take over all of his repairs, maintenance and management costs, etc. Then…agree that at the end, in 3, 4 or 5 years, you’ll sell the property or refinance it in your own name and pay off his current loan and give him back any equity he’s been carrying for you.
In this scenario, your benefits are exactly the same as if you’d bought the house any other way (plus some extras…like anonymity and a shielding of the title); and… the “carrying seller” doesn’t have to transfer the title to you, or take undue chances with any potential for your legal or personal problems (liens, judgments, etc.) along the way.
I drool when I see opportunities like this. In my own home (the one in which I live in Ca.) the situation and values were almost identical to the one you?re mentioning. My deal with the seller (Doctor and Mrs. Yaqub) was that if they?d put the property into the Yaqub Trust, I’d pay a full $3,000 p. mo and cover all closing costs?AND? give them 50% of any future appreciation there might be. They needed merely accept my assessment of value, and agree to a five-year agreement (with an extension for another two, in the event that financing were to become difficult or the market were to become soft at the end of the five years). In the process, I have acquired a wonderful home ('cost me a little over $3,000 to get in; no bank qualifying; no down payment; no credit qualifying; no credit risk; etc. AND…I have 100% of the tax deductions for interest and property tax; 100% of the house (use, occupancy, etc.); 100% of the loan’s principal reduction; 100% of the beginning equity (the house was worth quite a lot more than the entry price we settled on)…and–if there IS any–I get 50% of the future appreciation profit on sale, after having saved a $70-80,000 down-payment and most regular closing cost expenses.
Are ther other ways? Are there better ways? I don’t think so, but I could be wrong ('happens now and then).