Posted by Anthony-OH on March 28, 2002 at 24:54:44:
Posted by Anthony-OH on September 05, 2000 at 07:21:07:
Posted by Old Trader on July 29, 1998 at 21:23:03:
In Reply to: Re: 1031 posted by A Foster on July 29, 1998 at 17:59:26:
The Daisey Chain. If you remember from your childhood, that is stringing one daisey after another, until you decide to close them into a circle.
The can be done with real estate through exchanging.
You start out finding an owner that owns a single familly home with a $50,000 equity, that would like to exchange up to a fourplex. They price their home at $70,000 for example purposes. You are sure you will have no trouble getting $80,000 in for the home in an exchange. You execute a contract to exchagne them a property acceptable to them in exchange within 120 or 180 days. No one puts up any cash, using the promise to make the exchange (if you can find an acceptable property) as the only consideration.
You then find a four plex, that wants to exchange up to a large apartment house. You can get the fourplex for for $250,000, but you are sure you can get $300,000 in an exchange. You offer to exchange the home at $80,000 in on the fourplex at $250,000. You go back to the home owner, and they agree to take the fourplex at $300,000 using their home as the down payment. (You now have a built in profit of $60,000).
You now go out and find a 12 unit that will take a cash out on their propety at $300,000 for a very quick sale. You know you can get $420,000 on the 24 unit. The owner agrees, and you go back to the owner of the fourplex, who agress to take the 12 unit at $420,000. (You now have a profit of $180,000 built into the deal.
You take part of the $180,000 profit and pay for the home and pay off the loan on the home which you now own, and put $110,000 in your pocket for your trouble.
The figures may either conservative or exagerated, but they are here for example puposes. It works. I have usually cashed out after three or four legs, and have personally never carried it to the profits show below, as I took a quick profit and moved on.
Points to remember:
1: It takes no cash up front, as you explain you do not want either of you putting up a money deposit, as it could trigger some cash consequences.
2: You never have to ask if someone will take a property you have (sometimes they may want something like a home as partial payment on the larger apartment house, and at that time you can use the home you tied up first.
You only ask, what will you take for your property, and that is what you write the contract for.
3: When you reach the level you feel comfortable, you can close the daisey chain.
The best example was a man I knew over 25 years ago. It has been so long now, that I have even forgotten his name. He made 47 different legs in his daisey chain, in three states, in 90 days. He walked away from the closing table with his share (profit), being 11 small apartment houses and 2 working farms. It involved a lot of money, when everything was added up.
Yes this example really happened. I was not involved in it (darn it).
This is the principal of running a daisey chain.