plese respond anybody - Posted by Mark Durbin

Posted by Jack on February 11, 2001 at 18:19:42:

Hello Friend,

“starting block jitters!” There’s not a person that doesn’t experience that feeling when starting out. But you’ll overcome them.

Here’s something to remember: Experience will become you best friend. It will teach you what works, and what doesn’t work. It will also groom and season you in the marketplace.

Here’s another tip: When you study, it will also help if you ponder over each technique. Imagine yourself with the seller. Think about his or her benefits that will be derived from the deal you’re offering. For in truth, you are a problem solver. The motivated seller is under stress, and you’re offering the best possible solution to his or her problem.

In conclusion, I’d like you (as well as others) to think about this:

Each of you people that visit these newsgroups, and believe it or not, you’re on your way to having everything in the world you really want. But, to have everything, is a promise without a limitation. So my friends, you need to detect and free yourselves of any limitation that’s holding you back.

I’d be willing to lay odds that when you read the above, some of your minds said “No. That’s impossible for me.” That my friends is the “limitation” you’ve built-up in your reasoning process. But I’m here to tell you that it doesn’t belong there. I want to wipe it free from your mind.

Listen carefully to me. I have no stake in selling you anything. I don’t work for newsgroups, nor the gurus. I’m just “Jack.” But my message is this: Each of you can be whatever you make up your minds to be. You need not be poor, nor unhappy. And no, you don’t even have to be unsuccessful. That’s not your role in life. So, why are others successful — while still others fail at success? Simple friends. It’s taking in beneficial knowledge that’s directed toward your goals, and then acting on it. That’s the only thing that separates you from success. When you do that, all “limitations” suddenly dissolve. And it doesn’t matter whether you have a college education, or you’re a 3rd grade dropout, because taking in the knowledge directed at your goals is what prepped you for action on your part. That “action” (when taken) is what gave you your experience. That “experience” is what taught you to be a better person in your business deals. Your “deals” are what will give you the life you seek.

I wish everyone a life without limitations. To that end, move forward. —Jack

plese respond anybody - Posted by Mark Durbin

Posted by Mark Durbin on February 04, 2001 at 18:07:33:

My name is Mark Durbin. I’m 29, married and have a little boy, four mounths old. Im unemployed at the moment and have a little bit of time to check into this further.I have terrible credit, and my wife has yet to establish hers. Now, What I dont understand is how this is done. If the owner takes out a 1st mortgage of $27,000 and the sale price is $50,000, How can I get a 2nd mortgage on the house when the house is still in his name? And how can he sell it if he just took out a morgage for $ 27,000? 1. Can he take out a mortage with no problem? And what is required for him to do this? 2. What would be the best financing plan for my situation? 3. How is the homeowner assured that he will receive his money the ($23,000) that i still owe him if 1 year later i have a forclushure on the properity.? Where do i get the $23,000 4. After this is all said and done ,What would i have in the way of payments and loans.? And who would i all be paying.? 5. And what is carry back a second one mean.?Idont know or under stand. Any information you can give me on this matter will certainly shed some light on the wole ordeal. Thank you! Mark Durbin

Re: plese respond anybody - Posted by JohnBoy

Posted by JohnBoy on February 05, 2001 at 03:53:45:

/////If the owner takes out a 1st mortgage of $27,000 and the sale price is $50,000, How can I get a 2nd mortgage on the house when the house is still in his name?//////

You can’t! Only the owner on title can borrow against the property.

///////And how can he sell it if he just took out a morgage for $ 27,000?///////

EASY! He just puts up for sale! Then once he finds a buyer he can either pay off his $27k mortgage and pocket the difference from the sales price his buyer pays for the home. That’s assuming the new buyer was either paying him all cash or obtaining their own loan from their lender. There is NO time limit as to how long you need to own a home before you can sell it again. Another way he could sell is by selling on a wrap around mortgage. This means he is selling for $50k, his buyer has $3k to put down and he will carry the financing for $47k. The buyer would make payments based on the $47k amount the seller is carrying at whatever interest rate agreed upon between the seller and buyer. Usually the seller (if an investor) will set the interest rate higher than what their interest rate is on the $27k mortgage they have.

Lets say the sellers interest on the $27k mortgage he has is at 7% over 30 years. He sells to you on a wrap around mortgage of $47k at 11% interest over 30 years.

His principle and interest payment on the $27k at 7% interest amortized over 30 years would be $179.63, plus taxes and insurance.

The buyers principle and interest payment on the $47k at 11% interest amortized over 30 years would be $447.59, plus taxes and insurance.

The buyer would make monthly payments to the seller for $447.59 plus the taxes and insurance on the property. The seller would then make his monthly payment of $179.63 plus the taxes and insurance from the money you just paid him. After the seller pays his payment on the $27k mortgage he has, it will leave him with $267.96 left over, which is his positive cash flow coming in each month. $447.59 - $179.63 = $267.96 positive cash flow!

The taxes and insurance amount would be a wash since you would be paying that in addition to the loan payment amount and would be the same amount the seller would need to pay on the property.

//////Can he take out a mortage with no problem? And what is required for him to do this?////////

That all depends on the seller. If he has good credit and can qualify for the loan amount then probably no problem at all.

/////What would be the best financing plan for my situation?//////

Get the seller to carry the financing or get the seller to lease the property with an option to buy.

///////How is the homeowner assured that he will receive his money the ($23,000) that i still owe him if 1 year later i have a forclushure on the properity.?///////

If this will be a seller finance deal then it would be the seller doing the foreclosing against you if you don’t make the payments. The seller pays his mortgage to the bank. If he fails to make his payments then his lender forecloses on the property. The buyer pays his payments to the seller and the seller forecloses against his buyer if they default on making their payments to the seller. If this is a lease option deal then the seller just evicts you as a tenant that failed to pay the rent. This could also be treated as an eviction against a buyer that is buying on a contract for deed in most states.

///////Where do i get the $23,000////////

The seller finances it or if a lease option you get it when you eventually get financing to exercise your option. If this is an investment property that you weren’t going to be living in and planned on leasing to another tenant with an option, then you get the $23k from them when they go to exercise their option. Then you would get the full $47k from them that would allow you to pay off the original seller and any amount you sold above the $50k which was your original purchase price would be your profit.

///////After this is all said and done ,What would i have in the way of payments and loans.? And who would i all be paying.?////////

Depends on the price you negotiate and at what interest rate and term you agree on. You would either pay the seller directly (which isn’t a good idea) OR you would pay the sellers bank directly for his payment amount to insure his loan is getting paid to protect your interest and just send the seller his check for the difference each month after sending his bank their payment amount, (this is a good idea) OR, you can set up a 3rd party escrow account where you would send your payments to the escrow account and the escrow account would send the sellers bank their payment amount and then send the seller any difference that would go to him as his profit each month. This way you protect your interest in the property to insure the sellers mortgage is being paid every month and don’t end up with surprise one day that the seller quit making his payments and now the property is being foreclosed on by his lender!

/////And what is carry back a second one mean.?//////

Lets say you could qualify for loan for $40k? The seller is selling for $50k. You get the seller to agree to carry back a second mortgage for $10k.

Your new $40k loan would pay off the sellers mortgage of $27k leaving the seller left with $13k in cash at closing. Since you’re $10k short the seller agreed to carry a second for the $10k. Your lender would now be recorded as a new first mortgage in the amount of $40k and the seller would record a second mortgage in the amount of $10k, making the property encumbered with a total of $50k in mortgage liens against the property. You would then pay your payments on the $40k mortgage you got from your bank to them each month and pay other payment to the seller each month on the $10k second mortgage he carried back for you so you could buy the home.

You need to do like Jack said a READ EVERYTHING on this site. I would start with the “How To Articles” and “Success Stories” that are available here. You need to get a good basic understanding of what is involved here before just trying to jump in. Otherwise you can get yourself into a big mess if you don’t understand any of this enough before starting. So start by READING EVERYTHING!!!

One last thing Mark… - Posted by Jack

Posted by Jack on February 05, 2001 at 02:08:40:

I have this feeling you’re going to try to do a L/O, so I think I better give you this tutor on it:

If you Lease with an option to buy, and you can afford the monthly payments but have no way of coming up with the down payment, this option may be the right one for you. First, you negotiate the sale price of the home with the seller. Then you buy a one-year option by paying the seller a nonrefundable option fee. You move in and start paying rent.

The seller credits a portion of your monthly rent toward your down payment. Everything is negotiable, but rent credits of 34 to 50 percent are not uncommon. When you reach the necessary down-payment amount, you can exercise your option to buy the house at the previously agreed upon price. However, unlike the Contract Sale (i.e. Contract for Deed) you can choose not to exercise the option.

I was afraid I had not given you enough info on that method in my first post. But I caution you to grasp an understanding of the techniques before you embark on making REI deals. —Jack

Re: plese respond anybody - Posted by Jack

Posted by Jack on February 05, 2001 at 24:25:07:

Hello Mark,

I see you have no foundation in creative financing. I’ll briefly try asnd school you on some basics.

Part of what you posted above lacks some details, so let’s start fresh :slight_smile:

I’ll be the SELLER, and you’re the Real Estate Investor (BUYER).

I have a house I’m asking $50,000 for. My mortgage is partially paid off. I still owe $27,000 to my LENDER. That means my property has a lien against it for that amount. But, I have $33,000 in equity (the par value of my property minus the outstanding lien). This means my property is appraised at $60,000, but I have put it on the market for $50,000 (at a discount so it will sell quickly).

You do your COMPS (comparable pricing of same type homes) of the area. You find that other comparable homes are selling at $55,000. So, you feel this is a good deal. Therefore, you offer me $45,000.

I don’t accept your offer, but I counter with $48,000. And you counter back with $47,000. I accept your offer.

You tell me you want to buy the property but are strapped for funds. Then you pitch this offer:

“I’ll lease option to purchase your property. By this, I mean that I’ll pay you lease payments monthly. You in turn will credit part of my monthly payments until I have paid you an agreed upon down payment. At that time, you will provide me with a Deed of Trust.” (or Mortgage - depending on which state you’re located in) and an Abstract of Title on the property (this is a record of the title, or history of ownership of a property. It tells you if the property is clouded with liens, judgments, etc.)You continue: "I will also need you to sign an agreement that gives me the right to sub-let (= sub lease) to other tenants.

I say, "No can do. There’s a DOS clause (Due-On-Sale Clause)in my mortgage held by my first lien holder. When title passes I have to pay them off.

You counter: Okay, then let’s look at another way I could buy this property."

“Have you ever heard of a Wraparound mortgage? If not, it’s a method where the existing mortgage loan is assumed and the rest of the money needed to consumate the purchase is obtained from the same lender in the form of an additional mortgage which wraps around the first mortgage. Do you understand the concept?”

No, explain it a little more :slight_smile:

“Basically, you wrap the mortgage you owe to your lender, and you give me a mortgage for the $47,000 plus interest. I make my payments to you, and you pay your mortgage out of my payments, plus pocket the difference. When your mortgage is paid off, I’ll still be paying you the remainder of my obligation (mortgage). If you’re interested, let’s work out the interest rate.”

Sounds to complicated. Why don’t you just borrow from a lender and pay me the $47,000? At closing my $27,000 lien will be paid off.

“Like I said, I’m strapped. My debt to income ratio won’t allow for a loan of that size. But, how about this: Let’s do a Contract Sale (= Contract For Deed).”

What that? Hope it’s not complicated.

“No, not at all. It’s a type of sale of property where the title to your property does not pass until you pay pay off your existing mortgage with money furnished by me. Once you’ve paid off your lien holder, then the contract will have been fulfilled for me to gain title. You see, title will not pass until the conclusion of the contract. At which time, you will provide me with a mortgage for the remainder owed on the property. However, I would want to record the document, and I would need to check for liens, judgments and back taxes if any are owed before entering this type of deal. Are you interested now?”

Where do I sign :slight_smile:

Good luck friend! —Jack

Re: plese respond anybody (Added info) - Posted by Jack

Posted by Jack on February 05, 2001 at 01:34:37:

“. Can he take out a mortage with no problem? And what is required for him to do this? 2. What would be the best financing plan for my situation? 3. How is the homeowner assured that he will receive his money the ($23,000) that i still owe him if 1 year later i have a forclushure on the properity.? Where do i get the $23,000 4. After this is all said and done ,What would i have in the way of payments and loans.? And who would i all be paying.? 5. And what is carry back a second one mean.?Idont know or under stand. Any information you can give me on this matter will certainly shed some light on the wole ordeal. Thank you! Mark Durbin”

Mark, when the seller takes back financing, whether a first or second mortgage, they are acting as the bank or lender. In essence, they are carrying the financing the same as if you went through a lender. If you default, and foreclosure is necessitated, you lose the property back to the lienholder.

You asked: How is the homeowner assured of receiving his/her money? That’s the purpose of your signing a mortgage and a note. If you default on the mortgage, you lose what you’ve paid into the property. The mortgage is your pledge to pay, and is evidenced by the note you sign. They go hand in hand, but “notes” can be sold, whereas the mortgage remains the same, unless it is paid off.

Where you get the funds from to purchase a property depends on the financing you arrange. Whether it be through a conventional lender, owner finance, or some other form of financing. But, in creative financing, you are looking for the best possible financing to serve your needs and your long range goals. Owner financing is usually the best when it’s possible to deal that way.

Mark, you really need to learn the basics. Go to Creonline’s articles and start reading friend. They will be of great benefit to you. And later, consider purchasing a course they have to offer. They have some top notch gurus that will teach you the trade. Meantime, I wish you success in the business! —Jack

Excellent posts ^^^^^ - Posted by Mark D.

Posted by Mark D. on February 05, 2001 at 18:06:30:

Just good ole’common sense. These types of posts are why I come here. Great job guys!

thanks jack and everyone - Posted by mark durbin

Posted by mark durbin on February 06, 2001 at 22:39:44:

I would like to thank Jack and everyone who responded to my plee for help. You helped me understand real estate in a greater depth. Im lucky I found this website, it is full of so many valuable people and so much useful information. I will look forward to coming here and reading up alot. Good luck in the future, everyone.

Thanks again

Mark Durbin

Re: Excellent posts ^^^^^ - Posted by Jack

Posted by Jack on February 06, 2001 at 24:29:18:

Hello Mark :slight_smile:

Yes Sir, that is a fact. And your response is appreciated, because I was hoping to bring that point across. Common sense, and an understanding of the methods and the seller’s wants or needs will add those properties to everyones portfolios. And hey, if a brickmason can do it, then there’s not a one out here that can’t.

I know some of these folks are afraid to give it a try, but it’s as easy as I entailed it within the post. They just need to put the fear aside, because that seller needs them worse than they need him/her. We can all go find another seller, but locating another problem solver might not be as easy for the previous seller. So everyone reading this should keep in mind that you’re an ASSET, not a hindrance to the sellers. So go out there and ply your trade with pride folks. :slight_smile: —Jack

Re: Excellent posts ^^^^^ - Posted by sherry

Posted by sherry on February 06, 2001 at 13:40:10:

Jack,
just let me say that the examples and choice of words that you use are great. I know that you answered a great deal of questions that I have as well. You also are so inspiring.

Thank you so much

Re: Excellent posts ^^^^^ - Posted by Jack

Posted by Jack on February 07, 2001 at 01:22:00:

Hi Sherry :slight_smile:

Thanks! I try not to abbreviate the real estate investment terms used (like L/O = lease option to purchase) without giving the long name for them when possible. I know that many newcomers visit these boards and become confused by the shorthand used by the pros. So, I try to carefully choose my words so as not to make things any more difficult than necessary.

I’m glad to hear that you benefitted from my posts. And since I know a great many folks read each and every post, I try to be as thorough as possible.

Before I sign off, let me say that I believe each and every person that has the desire to enter the real estate investment field, they are no different than those of us that have been successful. They are just on a lower level of knowledge, but that handicap will not last for long. The more each newcomer learns, the better he or she will be equipped to go out in the marketplace. So, I endeavor to bring the newcomers up to speed as quickly as possible. For I myself was a newcomer at one time, and therefore I can still remember how time consuming it was to absorb it all. That’s why I hope to help lessen the time of the newcomers learning process. And, I truly want to motivate one and all, because each of their successful ventures will only spring forth if they take action. In that regard, I have faith in each persons ability, and I will lend a helping hand to any and all that seek help.

Have a GRAND Wednesday Sherry, and I wish you MUCH SUCCESS! —Jack

Re: Excellent posts ^^^^^ - Posted by kate-

Posted by kate- on February 11, 2001 at 16:04:46:

You are awesome, Jack!!

Going to Atlanta??

Kate

Re: Excellent posts ^^^^^ - Posted by DR

Posted by DR on February 08, 2001 at 11:49:37:

I’d like to add my 2 cents here as well: I am a “newbie” and am still in the information gathering stage. I have the Sheets program and am halfway through it (first time around!:-)). I make sure I read the posts here and elsewhere every day to keep internalizing the vocabulary of REI, and have even started making some exploratory phone calls just to shake off some of the “starting block jitters!” It is so helpful to get the advice and counsel of the experienced RE investors still returning to this site. Thank you for sticking around to “give something back.” Hopefully I will be in that position one day. I especially appreciate your posts, Jack, for the fact that they are well written and spelled correctly. I am ashamed to say that poor spelling distracts me from the message much of the time.
Good luck to all.

Re: Excellent posts ^^^^^ - Posted by Jack

Posted by Jack on February 11, 2001 at 17:39:15:

Hello Kate :slight_smile:

Thanks! I wish I could break away, but I’ve got to many irons in the fire at present. And hey, all of the e-mails pouring in from the newcomers — they would think I’m ignoring them if I didn’t answer personally. I can’t believe the response I’ve had from making a few posts. There are a great many people seeking help. I just hope I’m filling the gap on laying the foundation to help them get started.

Like I tell them, if a brickmason can educate himself, tackle multiple enterprises, then why can’t they? After all, I’m the lowest guy on the totem pole on these newsgroups. For there are some really elite people that offer advice on these boards, and they are so talented that I’m in awe of some of them myself. I have learned a great deal more from visting here, as well as other boards. In fact, I hope every newcomer is printing off all of the excellent posts we see on the boards, and they are placing them in tab divider notebooks. Before you know it, you’ll have a complete course on How-To just off the boards.

I would like to say though, that as each person progresses and builds on his or her foundation, and they are making $$$, that they take the next step and invest in some of these top notch gurus courses. It’s to their advantage to become fully equipped for the trade they’re plying.

Thanks again Kate, and I wish you (as well as all readers) successful ventures throughout your career. —Jack