Question:
What do you say to mortgage companies like Auquin when you know what the BPO came in at, and the mortgage tells you a different amount. On a deal I was doing with Auquin I knew for a fact that the BPO came in at $49,900, right where I wanted it to, and Aquin it came in at $81,000.
Answer:
First of all for everybody on the call who doesn’t know what a BPO is, it’s a brokers price opinion. That tells you exactly what the broker who the lender hired says what the property is worth. So, if Aquin is telling you that it’s worth $81,000, based on their BPO, then tell them that is fascinating. It’s hard for me to believe that a true professional would have valued it at that. What is their name so I can be sure never to use them? I want to make sure that I always get the best values, and I can tell you that is absolutely the wrong value for that property. By the way, you guys also should be concerned about that because, if they’re telling you that it’s worth $81,000 you’re never going to sell that house. That number will never work for me or for any other investor. Call me when no one else thinks so too. I want you to then hang up, then try back in a few days and try to get someone else. Now I know that they post all these things on their site and you’re absolutely right, they’re playing a game with you, and it has certainly been played with me many, many times, where they just take the number and they use their own desk evaluations, that’s actually where they came up with that number. So, they got the professional value and the professional says it came in at this price. Now what you might do also is call up the professional. The one that you met with to get the BPO and confirm, say I just wanted to confirm something. You and I chatted and you said that the BPO went in at $49,900, and I just wanted to know is that correct? Just reconfirm it with them, and then when you talk the second time to Aquin, after you’ve told them no the first time, say you know I just chatted with the person, the individual that gave you that pricing, and I knew that the number was off so I just wanted to call them up and see what they thought, and they said that the price came in at $49,9000. So, what am I missing here? And that’s if they bring up the $81,000 again. They may drop that totally, it may just be a tactic that that negotiator is using, and that sounds like a negotiating tactic.
Question:
I have an investor who wants to loan me money out of his self directed IRA account. Do I set up anything to create a custodial account, or does he? How does this work? Do we do something extra here to receive the funds?
Answer:
In order for him to be able to lend from his IRA, he’s going to have to set up a self directed IRA. Now you say that it is a self directed IRA account and in that case, if it is a self directed IRA, then he can lend right away. Now that means that he will have to notify the custodian of his account to be able to release those funds. Now by that, I mean he’ll have to notify them to release them to you. So, what you’ll do is create a promissory note for the amount of money that he’s releasing. His IRA will be the beneficiary or the owner of that promissory note. So, it means that the lender is the IRA account and you are the one who is being loaned to. Now if you think the advanced on our in-depth training at the Trust training, I teach you to set up a separate trust for the receipt of these funds. So, in your question when you mentioned the word custodial account, that’s where I would plug in the word trust account, and you’re actually going to set up a separate trust with a separate bank account and it will actually receive the funds. You will be the trustee of that trust that receives the funds. So the borrower essentially is that trust with you as trustee, and the lender is that person’s IRA. You can use the promissory note that is in volume 6, Borrowing, and by the way, everyone on the call, if you don’t have volume 6, Borrowing, you definitely need it, because it is where and how you borrow money, whether it is private money, whether it is public money, traditional money, and all the calculators to be able to do it with, it’s all there. And those of you on the call who do not know how to set up a self directed IRA or to help one of your clients set up a self directed IRA, the instructions are in volume 6, pages 56 and 57 where the steps are. So he’s going to lend out of his self directed IRA to your trust, your trust will then lend out to your individual trusts that are doing the actual deals. So let’s say that you bought a house on Maple Street and you created the 153 Maple Street Trust to hold title to that real estate, it essentially would borrow from the Private Money Management account trust and then it would give a mortgage back to the Private Money Trust, and then the Private Money Trust then would not have the money anymore because it is giving it to the Maple Street Trust, and then it turn it would have only as it’s asset the mortgage. Now what does the Private Money Trust owe? It owes the promissory note to the individuals IRA account.
Question:
How is a promissory note for lease option structured? For example, a $2000.00 note at 15% interest.
Answer:
We’ve got a $2000.00 loan at 15% interest. He asks would it be all due as a sum at the end of the time length of the note, or would monthly payments be made? That’s A. B; is it amortized? Or C; how about a larger promissory note?
Let’s cover A and B first. Actually, the answer is you can structure it however you want to. You can go ahead and calculate the interest now, and add it to the loan amount and make the new loan amount the entire amount of the loan. So let’s say for example that you were charging a 15% percent interest on $2000.00. Lets do a little calculation here, that’s $300.00. Then you would write the note for $2300.00 with payments of blank dollars per month. Whatever you have negotiated with, so essentially I think when you’re talking about a number like $2000.00, you’re probably talking about somebody who is moving into your property, and you want to do some kind of work out plan with them because they don’t have all of the money. That’s one of my favorite ways to set it up it is a promissory note, rather than to leave it in the lease or the option. You actually want to set up a separate promissory note, and that’s exactly what you’ve done here, and you add interest to it. Now you can do it one of two ways like you say. Can it be amortized; the answer is yes it can. So, what you do is put $2000.00 at 15% interest. So, what would be the difference? Why don’t we just go ahead and take the $2000.00 and add the $300.00 to it, make the note $2300.00 and make the payments say at $100.00 per month until paid. That would equal 23 payments. Now at the 15%, that is what’s called simple interest. Now the other way is when it is amortized, you take the $ 2000.00 and you amortize it at 15% interest. Well if all your client can pay is $100.00 per month then that would mean that you can actually get 15% annualized. Which means that 15% is actually the annual interest rate. Which essentially means you would make almost $600.00 in interest because you amortized the note over time at $2000.00 at 15% interest based on a $100.00 per month payment. So, that’s where the difference comes in. Is it simple interest or is it compound interest, and is it amortized interest?
Now what would be the distinction? What would help you make this decision as to which way to go? The answer is it depends if it’s a short-term note or a long-term note. In the example that your client may be able to pay if off over three to six months, then it would make more sense to do it as a simple interest note, add the interest to, and then work out the payment plan on it. If it’s a long-term note, say that it’s going to go past twelve months, then it would make more sense to amortize it and put the interest rate over the longer period of time.
Question:
I was told by a lawyer on an agreement for deed transaction that if I didn’t record the deed in the buyers name that we couldn’t give them the tax benefits or the interest deductions and that they couldn’t take depreciation. What’s your response?
Answer:
First of all the attorney is wrong and here’s why. The IRS in their rules clearly state who is entitled to the tax benefits. Tax benefits can be given by contract. That means that I could sell you a property over time and I could retain the tax benefits on this. This is done all the time in Wall Street. When people are taking huge tax benefits, let’s say that congress has granted a special tax benefit in a particular zone, for example the go zone right now in the Katrina redevelopment area. Congress has said we’re going to give 50% tax credits in that area. There are a lot of people coming in and literally buying those tax credits. So those can be sold, those can be mortgaged, those can be pledged, those can be granted by contract to a third party. So the developers essentially in that area are developing the property but separately either offering people who want to invest in that area those tax benefits or they’re selling them off to third parties. Now here’s what the tax laws state; that it can be given to anyone who has the use, right, and benefits of the property. The use, rights, and benefits. Well doesn’t it make sense then if you’ve sold a property on contract or deed, or what I call agreement per deed, then you have given away the use of that property to the buyer, you’ve given the benefits of that property to the buyer, and you essentially given the rights over to that buyer according to the terms of that agreement. So, once you’ve given away those three essentials, then they are entitled to the tax benefits regardless of what is recorded on public record.
Question:
How does a realtor of a national realty agency wholesale a deal to a buyer or investor? I’m assuming this is an unlisted property. How soon after a listing has expired can an agent attempt to wholesale that property?
Answer:
The fact that you’re a realtor of a national realty agency means nothing. The fact that you’re a realtor means something. Now you’re asking how do they wholesale a deal to a buyer? Well you can wholesale it, you can retail it, you can do anything you want to as a realtor, and you can act as a principle in the deal. Here’s what you must do. In the special stipulations section of the contract, whether it’s a realtor’s agreement or whether it’s Lou Brown’s agreement, you’re going to add the following words. Purchaser is a licensed real estate agents acting for their own account with the intent to earn a profit. So, once you add those words then essentially you have disclosed to the buyer exactly what your intentions are and that you are licensed and all that sort of thing. Now you have escaped the shackles of being a real estate agent.
Question:
Now the next question you ask is how soon after a listing is expired can an agent attempt to wholesale that property?
Answer:
The answer is the next day. The next day you can do that.
Question:
And the third questions you ask is how much should a realtor expect as a payout and how is it to be paid at closing?
Answer:
Well it really depends, most people expect to get anywhere from $1000 to $10,000 on a wholesale transaction. It’s really going to depend on how much room there is in the deal, how much profit there is in the deal for the buyer as to how much markup you can give. For example if you were buying a shirt for $15 and the market is $20 for that shirt, the most you can hope to get is $5 on that shirt. Now if you’re going to wholesale it to say Wal-Mart in between there, then you’re probably going to have to mark it up to say $16, get your dollar in between and the $4 is going to go to Wal-mart because they are actually bringing the customer to the table and they’ve got to carry it on their floor, and they’ve got to market it and they’ve got to do all the other things. So, they deserve the lion’s share of the profit. That’s what wholesale is all about. That the retailer, the person who is actually going to take the risk in the transaction, they’re going to have to do that, they’re taking the most risk in the transaction, and therefore they deserve the most profit in the transaction. As to how much you can make? It really is essentially based on how much profit there is in the deal.
Question:
Other than placing an “I buy houses” ad in the paper, what is the most cost effective way to find deals?
Answer:
Well I’ve actually got a number of those and in your Buying System volume one; I have a deal finding checklist. And what I recommend is that you choose five of those and in fact, you’re going to create five outbound lead generators and five inbound lead generators. So, what are the most effective of those? Number one are signs. Bandit signs work, they really work. Now I know that they are no-no’s in certain areas of the country, you have to test that, and if you get in any trouble, if they haul you into court then you stop doing it, but in the meantime they work very, very well. I have right now in my own right of way, in front of my building; I have bandit signs in front of my real estate office. I also have them in the windows of my office. I also have a lighted sign at my office, so I’m doing as much as I can to attract traffic right where I am. But you can do it other places too, and you can even do it in the yards of properties that you have for sale. You can put your “I buy houses” signs there too.
Now we also do another step in the process, whenever you buy a property in the neighborhood, you send out a letter to all the neighbors. I just bought the house at 858 Woodson Way, and I can buy yours too, here’s what we do, blah, blah, blah, I just bought your neighbors home at blah, blah, blah. And that is a great lead generator as well. So, signs, letters to neighbors, that is a localized lead generator that’s really effective, and then market to your target neighborhoods. Now what I mean by that is that you are actually going to choose two neighborhoods that you like, two areas that you like, and then you’re going to target market those neighborhoods. And that means that every month we do something in that neighborhood. First month it’s a postcard, second month it’s a letter, third month it’s a newsletter, fourth month it’s a brochure, fifth month it’s a sticky note, six month… see we’ve always got something happening within our target markets because that’s exactly where we want to buy properties and sell properties too. So, we also create lead generators in those areas to build a buyers list as well.
I can teach you a lot more of that at Millionaire Jump Start and also at Millionaire Deal Maker where we teach you not to do what everybody else is doing. Now this is essential that you learn this. Everybody else is working the foreclosure list aren’t they? Everybody else is working the NOD list, which is notice of default list aren’t they? Everybody else is doing what everybody else is doing. We don’t do that, and as a result, our licensees are having phenomenal success finding deals that nobody else knows about. I call them no competition deals. And this is exactly the type of business I want you to build, which is a no competition business. We don’t run up against everybody else. We don’t have to get in line with all the other investors because our clients don’t even know about these other investors, or if they do we are able to shun them off very, very quickly because we’ve got a much more professional approach on how we do our business. For example we use color postcards, color on both sides. We use a very professional look that has them want to do business with us because they say “Wait a minute, these people aren’t broke.” I think it’s so sad that people do postcards that are run off on a copy machine, and they cut them with scissors, and things like … oh my gosh, it just looks horrible. And you don’t think the customer sees that too? You don’t think the customer picks up on the fact that that doesn’t really look like a professional is doing these things. So, you be careful about those things.
And let me give you one more and then we’ll move on and that is the clipper magazine. When you put your ad in that nice colorful magazine called the Clipper Magazine, you can get some tremendous response on that, I want you to go for the cover on that as well, the back cover.
Question:
What is the process to setting up an LLC?
Answer:
First, we need to determine where that LLC needs to be siticed. Does it need to be siticed in your local dominion, where you are located? Or does it need to be siticed in another state? For example at my MAS training, I teach that Nevada is no longer the best sitice for a corporation or an LLC. Delaware is no longer the best, in fact what I’ve found is Wyoming is the best and the cheapest too, and you can set it up yourself. You can go simply to the secretary of states website and do it right there. You do have to mail in the information, they will not tell you if your name is available. You have to mail that in, but that’s okay, we can do that.
Question:
This also brings up the question should you have a local entity?
Answer:
The answer is probably. Now what I teach you to do is put each one of your properties in trust. So, your trust actually essentially becomes your local entity, and that entity is the owner for all intents and purposes of that property. That trust is the owner within that local jurisdiction so that trust can go to court, that trust can evict people, that trust can do anything within the local courts. However you can have the beneficiary of that trust be an LLC, and that LLC can even be in a different state. There is a lot more to that story and I definitely teach you all that at the MAS training. But setting up an LLC to go back to your question, is a very simple process, and you can actually do it at the Secretary of State’s website for the state in which you want to set up your entity.
Question:
We live is Suburban Chicago. Is it better to do our target marketing in the suburbs that have a declining or escalating home values? Both have working class people able to pay the rent.
Answer:
The first thing you want to look at is school districts, and what are the schools and how are those schools ranked among the entire state? Now those school rankings determine people’s need for housing and where they are choosing to be. They’re going to go for those; your better quality people are going to go for better quality schools. They are also intelligent enough to know that if they’re going to go for free schooling, meaning public schooling, then they’re going to have to get the best schools if they want their kid to get the best education. Education is something that I’ve learned throughout my career as a real estate investor, you can get all kinds of education, it’s not all good, and it’s not all worth the money that you pay. So, people have figured that out too, and they determine where they want to live, and where they want their kids to be. So pick the markets that have the best schools and that will help you to determine great things.
Question:
The median price for homes in souther Florida is $357,000; having a positive cash flow is impossible even if one buys the properties at 65% of the market value. Is there any realistic way to buy and hold long-term, or is flipping the only way to do business in markets like Miami?
Answer:
It really is determined by your exit strategy. Your exit strategy is so important. Isn’t it true that people will pay far more for a mortgage then they will pay for rent? If that ‘s the case then in high-end markets, and even in your local markets, when you get a high-end house and you can’t make the numbers work from a rental perspective, you simply sell it. But you sell it with owner financing. And I have all the calculators for that, and all the paper work and everything in my agreement for deed owner financing. It’s actually called Owner Financing Agreement for Deed and that is volume ten of your whole enchilada grande. So, volume ten give you all the details to be able to become the bank and actually to finance the property for the seller and gives you all the calculators to print out an amortization schedule and everything else. The one element of our agreement for deed that is different from what a bank would do is that a bank gives a mortgage and we give what’s called an agreement for the deed. Now what that means is that you as the investor get to hold on to that deed until the people actually pay you off. So essentially, you’re setting it up like a mortgage and you are collecting principle, interest, taxes, and insurance. However, the buyer does not get the deed until they actually pay you off. Isn’t that a good plan?
Question:
I recently bought a property subject to, and the seller agreed to carry a second. I used your system for buying subject to in a land trust. I used a wrapped promissory note and a wrap around mortgage all signed by the trustee of the land trust. What are your thoughts about using wrap around mortgages?
Answer:
I don’t like wrapped mortgages because typically you are granting the deed to the buyer. That means that you lose control. That means if they stop paying the payment, you must foreclose to get your property, or to get your deed back. The way I’m teaching you to do it with the agreement per deed, is you retain the deed, you keep the deed until they pay you off, and that I think is the best way to structure your business.
Question:
Where do I get private and hard money? I’m not going for the deals because I don’t think I can get the funding.
Answer:
We find that as being the biggest reason that most people don’t get moving in this business because they are terrorized that somebody will actually say yes and that they will have to come up with the money. Let me give you a couple of thoughts on this. Number one; the money flows to the deal. If you have a deal, let me assure you there is money for that transaction. And the way that money is available is through private money financing. Now let’s just think about this on several levels. First of all, I teach you that the seller is the bank. So, the first source of money is the seller. They have existing loans on the property. That becomes your first source of funds. Secondly, if they have equity in the property, then they become the lender because we have them carry back owner financing for the difference, and you’ll hear a lot more about that on that MDM call. Third, if we’re not able to do it that way or if it’s a short sale transaction, then we’re going to have to come up with cash, like real money. Where in the world are we going to get the money? Well, Lou Brown teaches you not to go to the bank, and not to qualify for loans. So, where in the world is Tom going to get the money? You’re going to start talking to people right away. I want you to talk to CPA’s, attorneys, doctors, lawyers, all kinds of different people out there in the world that are professionals, and I want you to talk to them about their IRA accounts and they’re pension funds. Are they satisfied with what the pension fund is doing? What are they currently earning on their uninvested funds? Then you say, if I can show you a way that I could triple that return in safe secure real estate, would you be interested? And if they say yes, then the next thing you do, is you get out my private lender kit. Now this is what we call our Lender Presentation Kit. Now this is sold in conjunction with my Borrowing Volume Six, and what I’m recommending you do is once someone says yes, at that point, you shut up, and get out the lender presentation kit and let it take over, because it says everything that your lender needs to see. Once they see that, they know for a fact they want to lend you money. And it becomes your source of funds.
Question:
How can I still make money if there is no equity and you can’t do a short sale?
Answer:
You can make money, and you say you can’t do a short sale, what you are going to do is sit down with the seller, first of all I don’t know why you can’t do a short sale, if you say there is no equity, you can do a short sale. It sounds like you just don’t know what to do. I can definitely train you on that, in fact, we have a system called Short Sale Profits, and we teach you exactly how to do the short sale with all the required paperwork to do it. So, I wouldn’t believe that you couldn’t do a short sale if there is truly no equity in the property. But let’s say that it’s a current loan and that the seller has no problems, and the property has no problems, and that there is no reason that the lender would discount it. Then plan B is the seller is going to pay you to buy that house. Now how in the world are we going to get into that conversation? I have something called The Cost to Sell Worksheet. It’s built into your Buying Volume One. What you do is sit down with the seller and literally go through the numbers with them of what it’s going to cost you to sell their home. When you do that, it will show then exactly why they should do business with you and exactly how much it’s going to cost them to get out of their home. You’re going to negotiate a payment from them, either a cash payment for you to buy the property, or a monthly payment, or a combination of the two. And I know this sounds odd to everybody on the call, but yes, many times our sellers pay us to buy their homes. Isn’t that a good plan?
Question:
Having trouble getting a deal. Realtor is in the way on one that is a pre-foreclosure.
Answer:
You’re going to have to get to the seller of the property. You’re going to have to tell the seller that the realtor is in the way. You’re going to have to say to the seller, “Look, here’s the situation, either your realtor is going to buy the house, or you’re going to have to buy the house. Right now you own it, and what’s going to happen is you’re either going to go into bankruptcy or you’re going to have a foreclosure on your credit for the next ten years. What I would suggest you do is pick up the phone, call your realtor, and tell your realtor that you want to work with me, and that you need the realtors help in getting this done. Or alternatively Mr. and Mrs. Seller, many times realtors in foreclosure situations will let people out of their listing agreement. Just ask your realtor to let you out of the agreement that you have to find a buyer for the property, you have no other alternatives.” The realtor, usually by the way, is not spending a lot of money on marketing on a foreclosure situation. Because they’re afraid that all their marketing money is going to be wasted and they’re afraid that the property will be foreclosed before they get it sold, so they just stop marketing. The very time it’s supposed to be marketed heavily, they go the opposite way because of their own fears. So, you need to chat with the owner about that and ask the owner to get out of the realtor agreement if that’s a viable option. If not, the seller is going to have to get the realtor involved in the transaction and get you there.
Question:
How can you be sure that a deal is a deal, no hidden monkeys about to twist your wrench? I mean how can I be sure that there are no unrecorded liens or judgments against the property.
Answer:
Well you are going to put that property under contract; you are going to use my buying contract from Buying Volume One. Once you put that property under contract, it will protect you so that you have time to go and check out the title for the property. Now to be sure that nobody steals the deal out from under you, you’re also going to record my Affidavit Memorandum of Purchase and Sale Agreement. You’re going to record that at the county in which the property is located to prevent anyone else from buying that property and to prevent that seller from selling it out from under you before you’ve had a chance to check the title. So you’re contract secures the property, and it gives you permission to order the title search. The title search will reveal any hidden monkeys about to twist your wrench. Any unrecorded liens or judgements against the property, and any other title issues that may affect the value of your title. Then third, you’re going to get title insurance from the people who check the title down for you.
Question:
How does one figure out how and/or when is the best time to do the creative deal structuring versus a straight purchase and still make a good profit.
Answer:
You must get training. How does one figure out when to do creative deal structuring versus a straight purchase and still make a good profit? It’s all in the system. The system takes you through the process of first determining the information that you need from the seller in order to be able to put an offer together. Secondly, once you gather that information the next thing you do is compare it to my Buy Offers and Deal Structuring Checklist, which is in your volume one, Buying. Third, once you have compared it to that list you put together three different offers that you can make to the seller. Fourth, you put together the paperwork for that. Fifth, you go visit with the seller. You make your presentation using my Seller Presentation Kit. You get them comfortable to want to do business with you. Sixth, once you have gotten them comfortable with doing business with you, then you get out the Cost to Sell Worksheet. You work out exactly what the numbers are going to be for you to sell their home. Seventh, you show the seller exactly what the numbers are with them sitting right there helping you calculate the numbers. Eighth, then you show them exactly what you can offer them for their house. By the way, you’ve already done your numbers. You already know what the numbers are; you’ve already got the paperwork done for it. You make your presentation; you make your offer, boom. You right up your order, what we call it the order. You write up your order at the seller’s table and have them sign it. Ninth, you get a testimonial from your seller. You get them to write up a testimonial.
Question:
In Georgia, I cannot figure out h ow to find pre-foreclosures. There is nothing on public record, any ideas?
Answer:
All foreclosures are at advertised in the newspaper. That is a pre-foreclosure. The foreclosure does not take place until they actually knock it off on the steps. What you want to do is call your local county courthouse, and ask what is the legal organ for the county. Lenders in order to properly foreclose on a property are required by law to advertise in the newspaper. In Georgia, they must advertise for four consecutive weeks. They must do it in a calendar month, in other words, it begins the first week of a calendar and it goes for four consecutive Thursdays, then the following Tuesday, which is into the next calendar month, the first Tuesday of a calendar month, all foreclosures occur in Georgia in all 159 counties, and it all is done between the hours of ten o’clock and four o’clock unless that Tuesday is a holiday, in which case it is the following day.
Question:
In Texas, lease options are not allowed. How would your method approach this in a lawful manner to help homebuyers to purchase properties in Texas?
Answer:
They did not outlaw lease options in Texas, what they did was pass a law that says that lease options have to be for a six month period. So to begin with, you could do a six-month lease option in Texas with no problem at all. The second part of that law says that the lease and the option must be contemporaneous, in other words that they are all done at the exact same moment in time. So what we do in Texas is we lease the property to the person for one month. We actually give them full twelve-month term, but we tell them if you pay your second months rent on time, we are going to grant you the option to buy this property. We are going to give you a three-year option, in other words everything else that I teach in how to do your lease options, you can do in Texas, you just don’t do it at the exact same time that you do a lease. And I’ve got about four other solutions in Texas too. You can use them in Texas and you can use my methodology there. By the way you can do contract for deed in Texas too. They’ve got a 32-page law that people said outlaws contract for deed in Texas, no it doesn’t. And the third thing is we support a national lobbying association that is reopening that conversation in Texas and I highly recommend that all of you get involved. It’s the National Association of Home Rebuilders and Investors. NAHRI. And if you want to make a contribution to it, it’s $250, you mail it to our office, we match it and send it on to NAHRI. Now what we’re trying to do is throughout the country, get onerous laws that really are ridiculous laws changed, and also to prevent laws like that from taking place. If NAHRI had been involved in Texas that would have never passed in Texas. So, we want to get lobbyist throughout the country to do those things, and NAHRI is the place to do that.
Question:
I need some assistance in owner financing. Besides a purchase and sales agreement promissory note, what other documents or forms are needed to cover my assets for owner financing?
Answer:
You actually don’t have to do a purchase and sale agreement. What I’m going to recommend is that volume ten Owner Financing System because it’s got all the paperwork there, and it’s not a virtue. You can use the purchase and sale agreement, but what I’m recommending is you use the agreement for deed, which is more than a purchase and sale agreement. It actually is much more than that. So that’s going to take care of you and take care of everything that you need, and give you all the forms to cover it and your assets for owner financing too.
Question:
I heard from a seller who called because of the Street Smart website info about how we work with homes with little or no equity, Yes they own two homes in the same neighborhood. They are living in one and renting the other.
Answer:
Now what Carol is talking about is she is not only one of our coaching students, but she also has part of our technology, which is our website. Our buying, our selling, and our borrowing website and she is saying that on the internet somebody found her and they not only have one house, they have two houses and they’ve given her all the details that allows her to be able to buy their home. Now she’s asking me through the coaching what to do with it. She says they have two homes, they’re in the same neighborhood, they’re living in one, and they’re renting the other one out.
Question:
The tenant just moved out of the rental. Due to their financial situation and their hardship, they need to sell both, and are very anxious to sell the rental within two weeks. They are not behind on any of the payments yet. First, the rental, the comps put it at $247,000, and they owe $249,000. Two loans with the same company Aquin. She used to work for this company. The first is $196,800 ARM. The bank agreed to leave it at six months for 6.625% interest to give them a chance to sell the home. She is paying interest only. Second, loan $49,200, its fixed rate at 9.8%. The payments are as follows, the first mortgage $ 1,086 per month at 6.25% ARM. The second $436 per month at 9.9% fixed. That is a total of $1522 in mortgage payments. One strategy is to take over payments on the first and ask the owner to pay the second for the time being. This is a solid neighborhood and this home could be a lease option. Is that a possibility, or try to short sale the second while I get a renter or lease option owner for the property? Is selling this home another solid option?
Answer:
No, I don’t want you to try to sell this home for cash. That is not a solid option in today’s market. You are competing with everybody else who has homes for sale, which by the way, I just read yesterday, is at an 18 year high. It has been 18 years since this many properties were on the market, so I want you to be very careful. Now this first mortgage of $1086, that’s a workable number. So what I recommend that you do, is I want you to buy, subject to the existing first mortgage, and then I want you to have the second mortgage totally paid off. Now I’ve got to teach you that and we’re going to do more of that in Millionaire Deal Maker, but what this means is we’re going to short sale the second, down to $1000 so that $49,000 is going to go down to $1000 cash. That first mortgage, you’re going to buy subject to that $1086. But we’re going to do one more thing. I’m going to have you go back to the lender and you’re going t have the lender make that adjustable rate loan a fixed rate loan throughout the term. Now the way you are going to do that is you’re going to call up the lender and you’re going to act as their financial advisor. You’re going to tell them exactly how you are going to be able to buy that home. But you’re not going to tell them that you are the investor. You are going to be the financial advisor for the seller. You’re going to say “Look, my owners have some challenges, and if I can help them through these challenges, they are not going to have to file bankruptcy. Here’s what I’m recommending that they do, and here’s what we’re asking you to do. This 6.625%, we want you to make that a fixed rate loan at 6%. We want you to make that an amortizing loan throughout the term of the loan, and we’re going to modify the existing loan to a fixed rate.” That will take care of you and that will take care of the lender. The second mortgage you’re going to totally reduce and pay that one off and that’s going to take care of that one.
