Looking for experienced L/O investors - Posted by Lisa-(OR)

Posted by B.L.Renfrow on April 08, 2000 at 21:50:37:

Just a couple things:

The SELLER transfers title into the land trust…you don’t “purchase in the name of your corporation.” This transfer is recorded and the lender may or may not be notified of the transfer. Regardless, under federal law, the lender cannot enforce the DOS as long as the seller retains a beneficial interest in the property.

Next, the seller transfers all or part of his beneficial interest to you (or your corporation). This transfer DOES violate the DOS, so it is done quietly and nothing is recorded.

If the seller were to then contact the lender, for some reason, and be stupid enough to explain to the lender how they had transferred beneficial interest in the property, the lender COULD enforce the DOS and call the loan due.

Whether the lender actually would is another issue. I know it has happened, but generally only if the lender isn’t being paid or some other problem arises. There are people who have called up the lender and told them exactly what was done, in an effort to “push the envelope” and see what would happen, and the lender couldn’t care less as long as they were paid. Nevertheless, the underlying loan remains in the seller’s name until it is paid off, so the seller would need to be aware of that.

Keep in mind that the only available public record would show the owner of the property as the land trust, and the trustee’s name. Your name would appear nowhere. That’s why anonymity is a big attraction of the land trust.

Brian (NY)

Looking for experienced L/O investors - Posted by Lisa-(OR)

Posted by Lisa-(OR) on April 08, 2000 at 24:21:44:

I am new to the world of RE investing, and I have decided the best way for me is through L/O’s, but I have a few concerns. For instance, What is the best way to handle a L/O so that you dont have to worry about the lender calling the sale due? Do any potential Sellers ask any questions about it, and if so, what do you say? What if they dont ask and they say something to their lender for whatever reason? What other questions do sellers ask that you need to be prepared to answer? Im pretty sure I can sell a potential tenant/buyer, but the seller is a different story. I dont even know where to begin. I know what their benefits are, but what if they ask questions I have no idea how to answer?

I had an idea about comparing 2-6 week old newspapers, see which ads are re-ran, doing a reverse directory on their phone number, then just sending them a letter. This way, only interested sellers would call me and I could start the ball rolling that way. Is that a good idea? Or too time consuming?

I would like to talk with anyone who has “been there, done that”, so please feel free to email me. I appreciate any help I can get.

Thanks in advance

Re: Looking for experienced L/O investors - Posted by B.L.Renfrow

Posted by B.L.Renfrow on April 08, 2000 at 11:46:46:


L/Os are an excellent vehicle for the newbie, but they’re not quite as simple or easy as one might think. Lease options are where many investors, including me, got started.

As for the how-to questions, I would strongly suggest you search through the many excellent articles on this site. You can get tons of info right here, and the price is right.

If you find L/Os are of enough interest you want to pursue them further, you should consider one of the courses. While I personally do not have any of the L/O courses available, I understand the ones from Bronchick and Joe Kaiser are both excellent. Some recommend LeGrand’s courses also.

Your idea regarding old classifieds is good. Other sources of L/O candidates are rentals and FSBOs. I do not deal with brokers on my L/Os, although I know some people who do so successfully.

Regarding your questions about the seller and the DOS clause, that has been hashed and re-hashed ad-infinitum here on the board, so you might want to do a search in the archive. But to answer your question, yes, it is possible. Your risk can be minimized by:

*Making sure the lender gets paid on time.
*Making the seller aware of the risk and how you’ll deal with it if it arises.
*Having the seller sign a CYA statement that he knows and accepts that risk.
*Making the seller aware he is jeopardizing the deal if he blabs to the lender about the arrangement.
*Using a lease agreement of less than 3 years duration.
*Use of a land trust or PAC trust as an alternative to L/O.

I personally think all the hype about DOS is overblown. Yes, it is a risk. But it can be dealt with. Your job is to learn how to minimize the risk to both you and your seller.

Brian (NY)

Re: Looking for experienced L/O investors - Posted by Phillip

Posted by Phillip on April 08, 2000 at 19:47:46:

Tell me if this is correct…I purchase the property in the name of my corporation and then deed it to a land trust with the seller listed as one of the beneficiaries to provide additional comfort levels for the seller.Would this halt concerns regarding DOS with the seller not contacting the lender and all payments are made on time? If the lender does find out about the seller (owner of record) lease optioning the property then there is no problem because the seller is listed as being a beneficiary to the land trust thus him being able to demonstrate continued interest in the property in question. Am I on target with my thinking?