Pre-Foreclosures. - Posted by Lonnie Turner

Posted by JohnWe (NoCA) on January 26, 2000 at 12:29:06:

Best way to take title is through a land trust or PACTrust. To give title, in CA you would use a Grant Deed with an AITD (Wrap).

This has to be executed properly, or it could backfire. If you’re really interested, I would suggest Bronchick’s course on Wraps.

Good luck.

Pre-Foreclosures. - Posted by Lonnie Turner

Posted by Lonnie Turner on January 25, 2000 at 15:48:20:

In my town there are a bunch of homes that go into foreclosure almost every day but must of the owner do not have any equity. Is there a way to make money with these homes? There is not that much competition for these> Any suggestions or experiences would be appreciated. Oh yeah, I do not have cash to make up the back payments.

Lonnie B. Turner

Re: Pre-Foreclosures. - Posted by JohnWe (NoCA)

Posted by JohnWe (NoCA) on January 26, 2000 at 11:34:21:

Lonnie asks, “How do I do a L/O on a home that is months in arrears?”

You have to cure the foreclosure by coming out of pocket. Hopefully you can get option consideration to cover your out of pocket expenses. I like wraps better. Here’s an example. You might have to read it a couple times, but it’s worth it. Here’s the power of a wrap…

Here’s what happened 2 years ago. An eager buyer purchases a property for 200K, with a 20% down, borrowing 160K at 8% for 30 years. His monthly payment is $1174.02. Everything’s fine for 21 months, then the guy gets laid off. He hasn’t made his payments in 3 months, and the bank is foreclosing. Right now he needs about $3500 to get paid up (3 months past due plus penalties).

Now you come in and take the property subject to. First thing you do is cure the foreclosure for $3500. Now you advertise the property like this…

Own Your Own Property Today! Only 22K down and less than $1750 per month. Owner will finance, no qualifying, bad credit ok.

Here’s what you’re doing. You’re wrapping the property for $220K with a 10% down payment and 10% interest for 30 years. The payment to the new buyer would be $1737.59 per month.

Here’s a summary of your situation…

Cash Out: $3500
Cash In: $22K
Net Cash Position: $18,500
Monthly Payment Out: $1174.02
Monthly Payment In: $1737.59
Cash Flow Per Month: $563.57

You collect $563.57 for 28 years, then a full $1737.59 for 2 years after that! More than likely though, your buyer will refinance, so you’ll collect a few payments, then get a $38K bonus. (198K - 160K, difference of payoff for new loan vs. old loan).

So, you want to make this a no money down deal? No problem. Find a partner, and split the cash flow. Explain to them that for a $3500 investment, they’ll get $281.78 per month for 5 years, then they’ll get their $3500 back. That is a 97% annualized yield. Where you gonna find that kind of return?

And in the end…life is good!

Good Luck.

Consider a wrap or L/O - Posted by JohnWe (NoCA)

Posted by JohnWe (NoCA) on January 25, 2000 at 18:56:19:

If the underlying payments are decent, you may want to consider taking properties subject to, and wrapping the property with owner financing, or lease optioning the property. I’d prefer a wrap.

If you offer an example, I’ll tell you what I mean. Please provide FMV, balance due, and monthly payment amount.

Re: Pre-Foreclosures. - Posted by Tom A.

Posted by Tom A. on January 26, 2000 at 11:54:54:

What do you do about deeds in this situation? Of course you do not want to kick in the DOS clause from the seller, and how do you deed to the now owner?