Posted by Lorelie on April 14, 1999 at 09:16:28:
How about putting $ in an escrow for automatic withdrawal of payments to the mortgagor that holds a say 2 month cushion. This would enable the seller to keep track of the balance and payments as made.
Just a quick point . . . - Posted by JoeKaiser
Posted by JoeKaiser on April 12, 1999 at 21:44:42:
Lots of questions of late regarding “how can I buy this property” sorta stuff, with the poster usually adding they have no money of their own to put into the deal.
It really comes down to this . . .
If you’re looking at the property as one you want to keep, then it’s HARD to pull off the no down deals without lots of smoke and mirrors. Frankly, if it ain’t lease option, it’s extremely difficult to pull off.
On the other hand, if it’s a property you want to just buy cheaply and flip for a quick profit, then it relatively EASY to buy without your own cash. You simply negotiate the deal and instead of worrying about where to come up with the dough, you invest your efforts in finding the right person to step into you shoes AND YOU LET HIM WORRY ABOUT WHERE TO COME UP WITH THE DOUGH.
After you’ve done a few of these, you will have the necessary funds to put down (if that’s something you really want to do - blah).
It’s pretty simple . . . buying to keep - no money down (hard). Buying to flip - no money down (easy), by comparison anyway.
Re: Just a quick point . . . - Posted by Bill Gatten
Posted by Bill Gatten on April 13, 1999 at 22:53:52:
Joe,
I fully agree with you and defer to you on this issue (at least in spirit). However… desperately praying here not to sound commerical (YOU DON’T NEED ME TO DO A PACTRUST! AND I THINK THE TERM HAS FINALLY BECOME GENERIC ENOUGH NOW. ARGH!!), let me offer a possiblity that perhaps you haven’t considered.
For someone (newbie or oldie) to acquire income property safely and easily with nothing out of pocket…without having to necessarily always look for the “bargains”… and without negative CF’s and unreasonable monthly expenses, it IS possible to combine your philosphy and mine (a bunch of folks on this board are now finding that out, with no small degree of exhuberance and glee).
In a nutshell: One of the answers to your post was by someone (Alex, I believe) who agrees with you completely (like I do), but said he was having trouble finding properties that were within the standard flip parameters (e.g., the right amount of equity, the right amount of discount, the right payment to rent spread, etc.).
So…how about a way for someone to break-in to this business WITHOUT needing to search for big equity spreads, elbow grease fixer-uppers, widow swipers, etc. And…without having to always resort to fast flips? In other words, how to work with an empty wallet and still be able to hold 'em (as it were).
Very simply–find Don’t-Wanter properties (especially ones with little or no equity) and agree to take over the payments via a land trust in the seller’s name (i.e., in the seller’s name to protect them–and you–from all sorts of legal potentialities, the least of which may the the DOS).
OK, now create an option to acquire the property in, say, another month or two; then advertise for someone whom, for NO Down (Closing Costs only), NO Bank qualifying, minimal credit qualifications and full tax write-off for a specified period of time, would live in the property, covering the closing costs (whatever they may be) and all monthly payments and management expenses.
They–this new resident beneficiary–now comes into the agreement for,say 2,3,4 or 5 years with some beneficiary interest in the land trust (i.e., any percentage over 10% gives them 100% [ALL] of the tax deductions for the interest and property tax they pay).
Within the agreement, you and they can agree (for a higher percentage ownership) to SHARE the profits upon termination of the trust… or you can give them only a minor percentage, so they can take the tax write-off (i.e., in exchange for much BIGGER monthly payments), and NOT give up the property at termination.
At the end of the initial agreement, the resident moves on and you merely raise the monthly payments, put someone else in, and start all over again. You can do this until the cows come home (assuming you have a cow, of course).
Joe, this system allows one to hold the property forever (if you can re-fi someday, or as long as the seller is willing to leave his name on the loan…I sold a house 16 years ago and am still on the loan with Washington Mutual, and we’ve been involved in several 20 and 25 year PACTrusts).
Just some food for thought.
As always, I enjoyed you post. Thanks.
Bill
Re: Just a quick point . . . - Posted by Alex Gurevich, TX
Posted by Alex Gurevich, TX on April 12, 1999 at 23:09:33:
Joe,
I guess it’s more of a matter of what kind of prospecting one is doing. In my market I am having all kinds of problems with finding cheap all cash deals. However, it’s relatively easy to find nice homes in good areas sold recently (2-3 years ago) with high FHA and VA loan balances, that I’ve been getting deeds on for absolutely no money. I got one on Friday for $50 notary fee, and I am closing tomorrow on another nice home, giving the seller $400 cash - ouch !!!. Of course I have to make payments on those $80K-90K loans.
I must confess it does take some skills in proposing this plan and having it accepted, but after a while it’s a piece of cake.
I suppose I could keep them for rentals if I cared to.
Re: Just a quick point . . . - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on April 12, 1999 at 22:01:19:
Joe,
That’s just the kind of straight forward, to-the-point comment that makes this board so worthwhile.
Thanks for lesson, and continued success to you.
Sincerely,
Bill K. (AZ)
Types of prospecting - Posted by Jim Beavens
Posted by Jim Beavens on April 13, 1999 at 16:24:49:
Hey Alex,
I’ll use this thread to post the message I sent you through email so everyone can see it, since it’s relevant to your above post:
You’ve mentioned in some of your posts that you do quite a bit of business taking over loans ‘subject to’, and I was wondering how hard you try to sell this concept to sellers. I ask because most of the educational material I’ve seen (Bronchick & LeGrand) seems to only recommend taking over a loan subject to when the seller doesn’t care about their credit and is about to walk away from the house anyway. Bronchick puts more emphasis on it, but he says that it just can’t be done that often. So as I start to go out and present different options to sellers, I’m wondering how hard to sell this concept.
It seems that by giving the seller a 2nd performance deed of trust, you allay one of their big fears, which is that you won’t make payments. The only other thing that would hold them back is that the loan would stay on their credit report, seriously hampering any future efforts to get a loan. So I started thinking that maybe I could forward them a copy of all the cancelled checks I write to their lender, in the hopes that a new lender they go to would credit at least 75% of the payments towards their debt ratios (however going around telling banks that somebody violated your due on sale clause might increase the chances of it getting noticed by the original lender).
Anyway, I was wondering if you had any thoughts on this as somebody who does a lot of these deals. I’m torn between only utilizing this technique when a special situation warrants it, or actively marketing it as a viable option for many homeowners and using it more as a cookie-cutter formula.
What are your thoughts about this?
Re: Types of prospecting - Posted by Alex Gurevich, TX
Posted by Alex Gurevich, TX on April 17, 1999 at 10:28:25:
Jim,
Pretty much all sellers are credit sensitive, they don’t just want to walk away and not care about what you do. The difference between those who do and don’t take these type of offers is still the same basic thing - their motivation level.
Some sellers call me and they are ready to do just about anything. In their situation there are only 2 options, they either sell to me, or keep listing with Realtor. So, a couple of important questions I ask them on the phone are: 1) what is your back up plan if the house does not sell, 2) will you experience any negative consequences if the house does not sell in 30 days. The answer to the 2nd question will reveal their true motivation. That answer could be the cornerstone of selling the benefits of my offer.
As far as performance deeds ot trust, and other security issues. First, I don’t ever bring them up myself. It’s a bit tricky, but with a bit of practice you can get them to say what exactly bothers them. I don’t volunteer any “solutions” before I get a specific answer about where they think their concern is. I would not except a blank answer that it’s too risky for them. I try to get an assurance from them, that the specific reason they give me is the ONLY thing stopping them from selling to me.
Sometimes it’s a technical issue more than anything else. They feel they “need” to have a title until my buyer qualifies. Then we’ll switch to a Contract for Deed or L/O discussion. If, IN THEIR VIEW, the security issue can be solved by me stating in writing that I’ll send them checks, or call them every month when I mailed the payment, or sign an Addendum that I’m responsible for repairs, etc. - that’ll be just fine, Mr. Seller.
If they think they need to be able to take it back if I don’t pay as I promise, to protect their credit - only then would I offer a solution - performance deed of trust. I used to offer this and much more to all sellers, I thought it would make them feel safe. It did not. It did the opposite for most of them, because they don’t want to deal with taking the house back. The truly motivated sellers don’t want to hear about other potential problems because, IT MAY SCARE THEM FROM MAKING A DEAL, they are ready to do with you.
By asking diligently, you can discover what a “security” means to them and, hopefully, be able to have a satisfying solution.
It still boils down to contacting a lot of people with only few motivted and willing to do what you offer.