Posted by MMNC on May 25, 2006 at 19:01:20:
I would get a “Realease of Authorization” signed by the seller. Call the lender and see if they will be willing to do a “Forebarance” on the back payments. Explain that you will be assisting the seller going forward to ensure their payment is not late. Explain that the home needs repairs and the seller doesn’t want to go into foreclosure. If they do this then I would see if you can get the seller to refi(If there credit isn’t already trashed)( And yes, I’ve seen this done before with people that have terrible credit))5 yr arm, or fixed. Have him pull out $35,000.00. $30,000.00 for him and $5,000.00 for repairs. Have the home deeded into a Land trust and have the seller maintain a 10% benficiary interest(So not to trigger the “Due on sale clause”) Have him sign over a Limited Power of Attorney relating to the property. Find a tennant to live there bringing in 3 payments plus closing costs into the deal with a trust termination date within 36 months. Split the future appreciation with the tenant 50/50 and pass the tax benefits on to the tenant as well(It can be done legally)
Current value- 215,000.00
Owe after refi- 175,000-180,000.00($5,000.00 down)
Possible pmt- 1300PITI(Guessing)
CF-$150 per month or $5400 over 3 yrs
Upfront profit- $6,000.00(Approx)
4% appreication avg- 240,000.00 in 36 months
50/50 equity split/share on 240-215-6000(Closing cost back to tenant) $19,000.00 / 2 = $9500 for you.
Total out of pocket- Maybe $5,000.00 to bring to the table for the refi.
Total profit- $20,900.00 over a 3 yr return on a $5,000.00 investment is about a 300% return or good enough.
Sounds complicated and yes there is more to it, but I do at least 1 of these Sub2’s a month. And avg 25-30,000.00 over 3 yrs with 0 money out of my pocket. And yes, most of these deals are pre-foreclosure. And the best part is…I’m not a landlord. Plus my buy out rate is over 90%. My tenant’s want to purchase the home becasue I share half of my profits with them. I hope this isn’t too much information. I get excited about these deals because you can get very creative legally and you can truly help everyone involved and still make a good profit. No need to be greedy!
Good luck and let me know if you want to understand more of how this is done. Take care.