Greg
I have something about like this involving a relative whereby we split the income from one of my MH’s, it is working out okay. To answer part of your question, yes!, above all, be sure to have a contract between you and whom ever is in on this or any other deal with you.
Friends are friends and relatives are relatives but business is business and that means to protect yourself and also protect whom ever you are doing business with. Written words are easy to understand, are not forgotten nor construed out of context and everyone knows what and when to expect whatever you agree on. YES, get a contract between the two of you.
Posted by Greg - TX on January 31, 2001 at 11:39:51:
I have a question about selling part of a note.
I recently found a very clean 3B 2B 1988 model singlewide setting on 1 acre. The owner is moving out of state and they are asking $14k cash for the home and land. The home needs no improvements. I?ve lined up a buyer who is looking for a home exactly like this. The buyer will pay $25,000 with $1,000 down financing $24,000 for 144 months @ 13% interest - monthly pmt $329.91.
I have a relative who wants to purchase part of the note. They want to buy the initial $14K and have me mail them a check each month for $192 which is $14K financed for 144 months @ 13%. I would then keep the remaining $137 from the buyers monthly payment and have no money out of pocket.
Is there an article that explains the Right way to do this? Should I have a promissory note between my relative and myself?
Posted by Dave Swett on February 03, 2001 at 14:48:09:
This is one of the most exciting posts that I have seen for quite a while. You have a great deal in your hand. Only caveat is that you should have or need to tie up the deal with the seller ASAP. Get a sales agreement or option from that seller. I have had a buyer go around me (happened once, you learn quickly) after gaining the knowledge of the address and then sign up a deal directly with the seller. You don’t have any control (just a coffee shop story) until you get the written contract with the seller.
Your relative’s loan is easy. After you close the deal with the buyer, you will be poorer by $14,000, but richer by a $25,000 IOU or note. then you turn around to your relative and give him the note as collateral for the $14k loan. This transaction is called hypothecation and it is done all of the time. No big deal except it should be done right. Perhaps you should borrow $15k and hire an attorney to write up both the $25k sale note and the $14k hypothecation note. Give a grand to the attorney and you will get great legal protection for treating your relative right.
It’s all legal-eze boiler plate and you can use the forms over and over for future deals.
Quick, today, go sign up the deal and get ready to take home $1644 per year. On a monthly basis of $137 that will pay for half the cost of leasing a brand new car. I like that kind of logic. Pretty soon, you will be giving seminars on TV–how to get rich in real estate.