Re: Bill's Cash Cow Course - Posted by Sheik

Posted by Stacy (AZ) on April 21, 1999 at 12:37:23:

State’s laws vary. Here in AZ, a land contract is quicker to foreclose than a trust deed up to a point. It depends on how much equity the defaulting buyer has in the deal. For example, if the buyer has up to 10% equity, the foreclosure period is 30 days.

Also, land contracts are usually structured so the defaulting buyer becomes a tenant if payments are not made, making it possible to evict, rather than foreclose. I still have to research this aspect in AZ, as should anyone doing subject-to deals for their state.

Stacy

Re: Bill’s Cash Cow Course - Posted by Sheik

Posted by Sheik on April 21, 1999 at 08:18:58:

From the article (http://www.legalwiz.com/cashcowarticle.htm) Bill has on his site, it seems the Cash Cow course promotes buying properties conventionally at about 10% discount and resell on contract for about 110% of FMV at a higher interest rate.

For those who are unable to purchase with a new loan, they can always buy “subject to”.

This seems to be a good strategy.
My concern is if I were to buy conventionally (loan is my name), what happens if my buyer fails to perform? In a mortgage state such as mine, a foreclosure process can drag on for 15 months easily. Does Bill address this in the course? How about taking over a loan “subject to”? What are the ramifications if my end buyer fails to perform?

I would like to purchase the course but am concerned about the above issues.

Thanks

Sheik

Re: Bill’s Cash Cow Course - Posted by Bronchick

Posted by Bronchick on April 21, 1999 at 18:06:09:

The worst case scenario is that court treats your land contract as a mortgage and requires you to foreclose. You then re-sell it again, with another down payment.

Smart investors stay out of court and bribe defaulting buyers (and tenants) to leave. Let’s say it costs you $10k to get rid of a buyer. Couldn’t you get another $20k from a new one?

Re: Bill’s Cash Cow Course - Posted by Sandy FL

Posted by Sandy FL on April 21, 1999 at 08:49:24:

I am going to let the pros handle the liability questions… I just have one comment, about Bill’s article…

Your comment on how Bronchick talks about “buying properties conventionally at about 10% discount and resell on contract for about 110% of FMV and at a higher interest rate”, I liken to a Worst Case Scenario.

In other words, with only 10% off and a traditional loan and traditional closing costs, you can still make a healthy profit. Also, inferring that if you can buy houses for much MORE than a 10% discount, and more creatively than by getting a conventional loan, then your profit potential goes up even more.

I guess that is one of the things I liked best about his presentation at my RE club here in So Fla. He showed a way to make money even if you are doing it the conventional way.

Sandy FL

Re: Bill’s Cash Cow Course - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on April 22, 1999 at 08:57:18:

Sandy,
This is a truly “worst case scenario”. Conventional investor loans require a minimum of 10-20% down, and 3-4% in closing costs. Even if you have more cash than you know what to do with, it may not be the best way to put it to a good use. It’s risky, invlolves qualifying and signing for personal liability on the loan and high leverage. Not a good combination. And with 10-20% cash down it ain’t a fantastic return either. In my market place the average buyer for a $100K house has about $5K to put down, even with seller financing. If I spent $20K to buy a house, my return is questionable even with $300/mo spread.

I thought the reason we buy courses is to learn how to not do it conventional way, and be a level above the crowd of folks who don’t take time and effort to study these things.

Re: Bill’s Cash Cow Course - Posted by phil fernandez

Posted by phil fernandez on April 21, 1999 at 09:26:09:

Sheik,

If your buyer defaults that’s why you want to buy subject to the existing financing. You are not liable for the debt, your seller still is. This of course hgas to be explained and disclosed to the seller.

I do have the Cash Cow course. It explains how to set up these deals and with the proper forms. Bill does discuss the issues that you are concerned about.

Re: Bill’s Cash Cow Course - Posted by Sandy FL

Posted by Sandy FL on April 23, 1999 at 13:24:42:

Alex wrote:
>Sandy,
>This is a truly “worst case scenario”. Conventional investor loans require a minimum of 10-20% down, and 3-4% in closing costs. Even if you have more cash than you know what to do with, it may not be the best way to put it to a good use. It’s risky, invlolves qualifying and signing for personal liability on the loan and high leverage. Not a good combination. And with 10-20% cash down it ain’t a fantastic return either.

*** I Know That, Alex … ***
Perhaps my post was miscontrued by more people than just you.
My apologies to you and to Bill, because he was certainly not advising
in his course that people go out and do deals the conventional way, it was just an example … a framework that most people can relate to, which he then
built upon it in the course, to illustrate how it COULD be done, CREATIVELY, and with much more attractive returns.

Hope that clears it up.

If someone wants all the details, they should get the course.

Sandy FL

Re: Bill’s Cash Cow Course - Posted by Sheik

Posted by Sheik on April 21, 1999 at 12:31:33:

Thanks Phil:

One question. Does Bill promotes SELLING “subject to” as well?

It seems (to me) that a better way would be to sell via L/O. This way you’ve elimated any potential foreclosure situation caused by your end buyer.

Sheik

Re: Bill’s Cash Cow Course - Posted by rayrick

Posted by rayrick on April 21, 1999 at 11:34:46:

Really Phil? You make it clear to your seller that you will be reselling the property under some sort of payment arrangement and if your buyer defaults, it’s the SELLER’S problem? I’ve always taken the attitude that that’s what I bring to the table. It’s my business. I’m reliable. I’m assuming the risk. If the buyer defaults, it’s MY problem.

There’s actually a realty company in my area that does a ton of business helping sellers who haven’t sold sell their houses on a contract for deed. They must do some sort of a land trust thingy, but I don’t know the details. Anyway, they just find the buyer, pocket the buyer’s upfront money and they’re out of the deal. I figure what I offer over what they do is that I’m NOT out of the deal. If the buyer defaults, I’m on the hook until I can get them out and get someone else in. Is that they way most folks out there do “subject to” deals, or am I just being naive?

-Ray

Re: Bill’s Cash Cow Course - Posted by phil fernandez

Posted by phil fernandez on April 21, 1999 at 19:25:34:

Hi Sheik,

Bill does promote buying subject to the existing financing in his Cash Cow course. You bring up a good point about subject to verses a lease option.

Where that comes into play is if your buyer defaults. With a lease option you can get rid of him much quicker.

Also in Bill’s course he talks about contracts for deed. This to me is the best solution. You make up a contract with your potential buyer. If he performs on his contract with you he gets the deed. If he doesn’t , no deed and hopefully no need to foreclose on him.

Re: Disclose, Disclose,Disclose - Posted by Jackie in Dallas

Posted by Jackie in Dallas on April 21, 1999 at 17:26:12:

…as my attorney always says.

This is both for when you buy subject to and when you sell using either a wrap around note, CFD or lease option or rental.

You don’t ever want to be in a situation where your seller or buyer sues you for deceptive trade practices - claiming that they would not have entered into the transaction IF they had known (whatever you did not disclose) examples: there is a due on sale clause, the lender COULD call the loan due, the loan will stay in the name of the original seller, you are making no promises to assume or payoff the loan, etc, etc, etc -

CYA

Re: Bill’s Cash Cow Course - Posted by phil fernandez

Posted by phil fernandez on April 21, 1999 at 12:17:11:

Ray,

I might have been unclear with my previous post. If my buyer walked, I to would find a new buyer. I want to be someone that my sellers see as reliable. What I meant was that taking subject to I would not be liable for that mortgage because I did not originally sign the note.

I still think you have to alert the seller and make it clear to him that he still has an obligation on the mortgage that I’m taking subject to. He won’t be happy if down the road, thinking that he is done with the mortgage, he finds out he is still on the hook.

At the same time you DO tell him that you are reliable and will do anything within your power to see this thing through.

Hope that clears it up a bit.

Re: Bill’s Cash Cow Course - Posted by Redline

Posted by Redline on April 21, 1999 at 11:48:35:

RR, legally the whole gist of “Subject to” means that the original financing STAYS in the seller’s name and it’s never in your name. So despite the fact that you “stay in the deal” and take responsibility … if heads roll … it’s gonna be the head who signed the mortgage document, not yours. (And this must be disclosed).

RL

Re: Bill’s Cash Cow Course - Posted by rayrick

Posted by rayrick on April 21, 1999 at 12:19:38:

I’m hip to all of that, Redline. My point is just that I’m making a commitment to the seller that I’m not going to fold because my buyer defaults. If I need to come out of pocket to keep the loan current, I’ll do that. I would have to find myself in some mighty extreme circumstances before I would let the problem fall through to them. but they still know that ultimately, legally, the liability for the loan rests with them.

-Ray

Doesnt have to get too extreme - Posted by HR

Posted by HR on April 21, 1999 at 22:56:20:

Ray,

I can imagine some circumstances in which I would walk from the deal and let the seller deal with the consequences. No, this would not be my first preference; it would be my last recourse. But I would do it if the property turned into an alligator.

That’s why I would do business with a LLC created for that business transaction. Let the seller sue your broke LLC, making sure your seller can’t get through to your stuff. Now that would hurt.

Just some thoughts,

HR

Re: Bill’s Cash Cow Course - Posted by Sheik

Posted by Sheik on April 21, 1999 at 12:28:07:

If you were to sell “subject to” as well, how do you handle a defaulted buyer who has no intention of moving? (In other words, the property is going to foreclosure). WOuld you upkeep the payments to the seller during this time (could well be 15 months in some areas). This doesn’t seem logical.

Perhaps, a better way would be to BUY “subject to” and SELL via L/O.

Comments any one??

Sheik

Re: Bill’s Cash Cow Course - Posted by David Alexander

Posted by David Alexander on April 21, 1999 at 13:10:00:

Yes,

Exits would be:

  1. Sell on Contract for Deed(my preferred method)

  2. L/O(Better from Tax standpoint)

  3. Assign the deal to your buyer for cash and paper.

  4. Rent them out

  5. Retail em’ make buyer get a new loan

  6. A combination to do what works for you

David Alexander