Question:
I’m in the middle of buying property that we intend on flipping. The house has an above-ground pool and it’s three-quarters full of stagnant water. What’s the best way to empty the pool so we can demo the pool?
Answer:
What I would probably look to do first, if it’s an aluminum-sided aboveground pool, you can probably get some tin snips and cut a hole in the side of the aluminum siding that the framework around the pool is on. Then, the pool itself probably has a vinyl liner. I would get a utility knife and just kind of slice that thing open. Not too large, but so that the water can sort of come out at a slower pace and then, if there’s ground around it, that water can be absorbed by the ground. You may even want to start higher up on the pool, let that amount of water seep out, then cut a lower space. Come down maybe a foot and let that amount of water seep out. Then come down another foot and let that amount of water seep out rather than just cutting a hole in the bottom and hoping for the best. Otherwise, it may totally flood the area and that wouldn’t be a good thing.
Question:
We are purchasing a house that the previous owners converted the garage into a living room. Would you convert it back to a garage? What would you recommend if we were flipping the house?
Answer:
Well, here’s the thing. If the conversion is a nice conversion, it may be that your new buyer will be looking for that very thing. I usually look at it this way: if there’s square footage – finished, air conditioned square footage – there, I really want to keep that because sometimes in order to get the sale on a property, you have to merely out-square foot your competition. In other words, your property compared to another house has more square footage maybe perhaps at a close to same price. That usually pushes them over the top when I’ve got extras that the other houses don’t. That’s always something to pay attention to. Even when we’re building houses, we look to out-square foot the competition.
Question:
When you purchase a property “subject to,” when do you get, if ever, Title Insurance?
Answer:
The answer is it depends on how much money is on the table. Number one, you want to protect any cash that you’re putting into the deal. Number two you want to protect any equity that you’re getting in the deal. If the deal is thin and has very thin margins, then you don’t have to worry about Title Insurance as much, but when it comes to actually protecting cash and equity, then you definitely want to get Title Insurance.
Now here’s an interesting tip for everyone on the call: if the original buyer bought the property with Owner’s Title Insurance, guess what. There’s still Title Insurance on the property. It covers the time between the beginning of time and up to when your seller bought the property. So, in other words, let’s say that your seller had bought the property three years ago and they got Title Insurance, then that Title Insurance covers up to the time that they took title to the property. So, if you do a careful title check down and you don’t find anything, particularly in the span of time from the last three years, then title insurance becomes an option.
But here’s another thought. Title insurance is updateable. That means when you do your title check down, you can update the old policy by merely paying a few dollars for an update. In many cases, $40-60.00 for just an update of an existing policy. Now your questions is going to be so how do I know they had Title Insurance. Where is that recorded? Well, bad news; they don’t record title insurance anywhere. It doesn’t show up anywhere except on the seller’s closure statement. So, what you want to look at is if they had a HUD-1 closing statement, then you want to look to see if they mentioned Title Insurance there. If they do and if it is showing over in the column where they’ve actually added up the numbers, they’re showing an amount over there, then voila. You have Title Insurance.
Now, you have to be careful because there’s two types of Title insurance. There’s Owner’s Title Insurance and there’s Lender’s Title Insurance. If that property was bought, let’s use the same example, three years ago and your seller now had bought it with a new loan, then the lender will always have gotten Title Insurance. The question becomes did your seller also get owner’s title. So there’s a difference. There’s lender’s title and there’s owner’s title. Lender’s title covers just the amount of the mortgage. So if your seller had put say 20% down, that mortgage amount is covered, but the other 20%, the equity in the property, is not covered unless your seller also got owner’s Title Insurance. So you want to examine the HUD-1 closing statement carefully to see if they bought both lender’s title and owner’s title and, again, you want to look over there in the column where they add everything up and see that there’s an amount there for those two different Title Insurances and then you have got yourself protected.
The next aspect of that is if you want to get Title Insurance, you typically cannot get Title Insurance without using a title company. So you’ve asked the question: do you close it yourself or do you have it closed professionally? Well, the answer is if you close it yourself, you cannot get Title Insurance unless you run a separate title check down and you order Title Insurance from the person who does the check down. Now, sometimes that is a licensed person who just merely, not licensed, but rather has Errors and Omissions Insurance, and they check down titles all day long. They make a mistake at the courthouse and don’t find something, then you’ve got a real problem. If you don’t have Title Insurance, but they do have Errors and Omissions Insurance, you can come against their Errors and Omissions Insurance. So that’s where, in some cases, we use what we call a “title dog,” somebody who just checks down title all day long and then refers those on to various closing attorneys, lenders, etc. so they can close a transaction.
The rest of your question is do I have it closed professionally. Well, in many cases I do for several reasons. One is for the psychology of the closing. When the seller actually experiences going through a closing at an attorney’s office, there is a definite disconnect in their mind from that property, as opposed to you set across a table and sign a bunch of papers and they really didn’t get it that they had sold their house. Obviously it should be clear to most individuals that they have sold their home, but let me tell you something. There is a large span of human beings within the United States some completely with a clue and others without a clue. So, we want to protect ourselves in our transactions. If you suspect that there’s going to be any future problems whatsoever, just go ahead and get it closed by a professional and again, if you’re going to want Title Insurance, you’re likely going to have to close it with a professional who can provide that Title Insurance.
Question:
Here in Indiana we use title companies. What paperwork do you give the seller if they want to qualify for a new house loan?
Answer:
Of course when someone is looking to sell you their house and you say to them, “What we do is take over payments until we get the house sold, will that work for you?” Then what you’re really saying is, “I want to take over your existing financing.” So savvy sellers say, “Well, wait a minute. What if I want to go buy a new house and I want to get a new loan and I already owe this loan? What am I to do?” The answer is, first of all, have your mortgage broker take a look at this. I’m going to give you a copy of the deed to the property. In other words, you have deeded the property to us. You no longer own the property. When your mortgage broker says, “But hark, there is a mortgage still showing on your credit report.” You say, “What? I’m so surprised. I’ve sold the property so there shouldn’t be a mortgage showing on there. Here, why don’t you call the people who bought it? Maybe they can shed some additional light.” Then, of course, they can call us and we say, “Well, we have bought the property. We can fax you over a copy of the recorded deed if you need to, just to confirm that indeed the property has been sold” and, basically, you have to feign ignorance that you don’t understand why the mortgage is showing up on their credit report. What happens typically is the mortgage broker checks it off of the checklist and they ignore the entry on the credit report and, in other words, it disappears as if it was never there.
Question:
What is the best way to pick a farm area to wholesale houses and raise some cash? Is there another method that you have used?
Answer:
The thing about wholesale properties is that when you’re putting together your buyers list of wholesale properties it’s usually investors and they’re usually looking for a bargain. You may even want to construct and build two different wholesale lists. One is for investors and the other is for doctors, lawyers, dentists, people with professions that don’t intent to leave their profession, but they’re looking to own some real estate at a good price. But they don’t necessarily intend to go and do a huge rehab and go through all the pain and suffering that we, who are full-time in the business, are willing to go through. Why? Because it’s our full business. They’re just looking for an investment and they’d like to have it slightly below market. So, when I’m looking at wholesale properties or building a wholesale business, I want to really look at two things, two different kinds of buyers.
So essentially, the first thing I’d do is start to build your buyers list first before I would look to find wholesale houses because what’s going to happen is, if you know who your buyers are and you know what they can do, then you know what you can do with houses. So I would kind of put the shoe on the other foot and say, “Let’s build that buyers list first.” Those of you who are on the call who don’t have the web site, you can go to streetsmartinvestor.com and you can look at the web site right there. In fact there’s a little tour there and you can see what we’re talking about here. Because we’ve got web sites for buying property and we’ve got web sites for selling property.
So what I would advise is once you get these leads for potential purchases on these properties, you enter them in your selling web site questionnaire. That loads into your back-end database so when you do get the lead, you can compare the lead to all of your potential buyers. Then we can craft the deal accordingly. Let’s say that your doctors, lawyers, professors and dentists and all these kind of people. First of all, they can qualify for loans. We’re not even going to mention to them that they can get owner financing or hard-money financing or anything like that. We’re going to expect them to go to the bank and qualify for a loan. So what we’re going to do is we’re going to treat them with kid gloves. And just imagine that you could employ somebody to just merely make outbound calls to CPAs, doctors, lawyers, all these people I just mentioned, and ask that question: Would you be interested in being on our wholesale buyers list for property? Are you interested in owning real estate? Well, I’ll tell you what, a very significant percentage would be interested and it would be a great thing to already have the comfort of having a buyers list before you acquire the property.
Now, with all that said, the next thing I would do is to answer your second question: What is the best way to pick a farm area to wholesale houses and raise some cash? Is there another method you have used? All right, now let’s bring into the mix those investors we were talking about earlier. Investors are looking for cheap houses so let’s go find some cheap houses. Let’s go to the almost-war zone and the war zone. Let’s get the owners list for non-owner occupied properties in those areas. Let’s start our campaign of postcards and letters to those non-owner occupied lists.
So, in other words, how do you find that? Well, there’s several different list providers. One is melissadata.com and we’ve got several others that we provide through our Mail Whiz that actually does all the mailing services for you; they get the list and they also do all of your postcard mailings, your letter mailings, and your brochure mailings and your newsletter mailing and what they do is also help you to obtain the list. So first you must obtain the zip code or the area or the streets that you’re looking for, then they can obtain the list for that area. There is a charge for the list and there’s really great pricing they can do on a campaign basis. If you’re interested in more information on Mail Whiz, call our office at 1-800-578-8580 and we’ll give you more details about Mail Whiz. It’s a phenomenal, phenomenal opportunity to get all your work done for you at very, very reasonable price. It ain’t for free, but it’s reasonable. By the way, it includes color postcards, color on two sides, so it looks very, very professional when your postcard comes to a non-owner occupant owner who would love to get rid of their properties in those areas if they had the chance to. So, they do respond well and that’s what I would choose as my market to go after and then build from there.
Question:
My tenant always think that if they pay the late fee they buy the time for the whole month. They can be late as long as the end of the month. I know it is not right, but how can I enforce or let them know that’s not the purpose?
Answer:
Let’s start with the rental agreement itself. In Book 2, that’s Volume 2, your standard real estate rental agreement on page 114. It says the following: “Rent is payable monthly in advance, without notice or demand, at the rate of [blank] dollars per month on the [blank] day of each and every month during the initial terms and any extended term of this agreement and shall be annually adjusted. Unless otherwise notified in writing, the monthly rental payment shall increase annually.” It goes on to talk about the annual increase. Rental payments shall be made at the office of management, blah, blah, blah. Then it goes on to say: “Mailing the rent by the due date does not constitute payment. Rents must be received at their office of the management before 5:00 p.m. on the due date of each month to be considered paid. Monies received are applied first to any lost rental discount, second to any outstanding additional rent, third to any unpaid fees or charges, then fourth to any current rent or rent to become due. This could result in unpaid rent, which would be subject to additional rent as contained herein.” Now, of course, in paragraph 5, we explain additional rent: “If management elects to accept the rent after the [blank] day of each month, resident agrees to pay $5.00 for each day after the [blank] day of the month as additional rent.”
So, first of all, the way I just laid it out to you, the money is first going to go to your lost discount. So if you’re expecting $1,000.00 rent, then I hope, you’ve used paragraph 3, to write $1,050.00 a month or $1,100.00 a month. Then, paragraph 4 discounts that rent for prompt payment. It says time is of the essence of this agreement. If the rent and any previous balance due is received and accepted on or before the [blank] day of the month, due date as described above, and resident complies with the maintenance requirement contained herein, a $[blank] discount will be credited to the rental payment.”
So what that means is that now, if you’ve written it for $1,050.00 let’s say, and in paragraph 4 you gave a $50.00 discount, that brings it down to $1,000.00. However, if they don’t pay on time they lose that rental discount, which boosts it back up to $1,050.00, as contained in paragraph 3, then on paragraph 5 you also charge them $5.00 per day until they get you paid up. Now, that should be exactly what their understanding is and that should be the paperwork you have them under. If that’s not the paperwork that you have them under, then write to me on the next call and I’ll tell you how to get them out of the old paperwork and into the new paperwork.
So, the next thing I want to address, though, is that in your Book 8, which is the property management system, we have another form and that form is your statement of rental account and it’s a letter that you send to your rental client stating exactly what the deal is. “We are in receipt of your partial rental payment of $[blank], which we received on [blank] date. Currently, your account is showing a balance due as shown below.” And then it goes on to explain to them exactly the problem that they have and that a “good rental performance will build favorable reports for your important financial future and your immediate action is required” and there’s several paragraphs in there reiterating the importance of your tenant paying on time.
Then there’s a breakdown – account status. Number one: lost rental discount. Number 2: outstanding additional daily rent at $5.00 per day for [blank] days. Number three: existing unpaid fees or charges. Number four: current rent due from period A to period B. So, like, the 25th of the month if I collect all my rents on the 25th of the month and we start at the last period it was due all the way up to the 25th of the following period. We put that amount in. Ten number five: less payments received and on what date we received it. Take that number off and then it says “remaining balance due: x dollars. Remember to add additional daily rent of $5.00 per day until the full balance is paid in full. Acceptance of your rent after the due date shall not altar the terms of your rental agreement. It’s your choice. We appreciate your cooperation, compliance, blah, blah, blah.
So, this is Form-IPM 4602. It’s page 166 of your Book 8, that’s Volume 8, Property Management. By the way, those of you on the call who don’t have Volume 8, Property Management, you should get it if you’re managing over three rentals because it’s really got all the stuff that’s essential to your business. Every letter you’ll ever write to a tenant, every accounting procedure, the collection procedures, the dispossessory actions, how you get them out of your property, how you collect from them, all the details about how to truly manage your properties. Weekly rentals, monthly rentals, lease options, the whole bit. So, that’s Volume 8, Property Management. It’s more in-depth training on property management. It’s available at $699.95. At least that’s the current price. I understand that a price increase is going into affect very shortly so you want to go ahead and take advantage of that and build your library of things you need if you’re managing more than just a few properties.
By the way, that rental agreement in Book 2 is BSH 1703. That’s BSH Form 1703. Those of you with our buying or selling web sites, or both, we turn all of those forms on for you on the backside of your web site. All the ones that you own, the foundational piece, the tools, we turn on the forms online for you so you can access them anytime, anywhere for the web site users. So if you don’t have our web sites, that’s a good thing to be able to add to your repertoire because it adds so much more value to how you manage your business, how you manage your leads, how you manage everything that goes on because you’ve got access to everything right online anytime you need it.
Question:
A lady who has been trying to sell her house for one and a half years on the market let me pitch my presentation to her and she is considering it. The one and a half years has cut into her profit big time. The home is in a nice neighborhood with houses in the $350’s to $400,000’s. I can get it for about $300,000 subject to the existing mortgage. However, the owner of ten years was a victim of an assault and robbery in the house two years ago. The neighborhood is upscale and the crime was not random; they knew who she was and that she lived alone with one teenage son and had several nice things due to her previous marriage to a man from a wealthy family. Honestly, she discusses and flaunts her possessions publicly, which probably made her a pretty big target. Signs lead to it not being random. Obviously, the case will be disclosed to any buyer owner-financing I can find, but what are the requirements and best practices in cases such as reporting past crimes at a house to this degree?
Answer:
Well, first, I’m not sure why you would mention it. That’s like saying the walls are currently painted green; they used to be painted yellow, but now their painted green. Why would you even mention that the walls used to be painted yellow? What difference does it make? Unless they ask, “Have these walls ever been painted before?” Then you can disclose, “Yes, they used to be yellow, but we painted them green.” In other words, I wouldn’t say anything. I wouldn’t mention it. If the buyer asked, of course you’ll tell anything you know, but frankly it is very, very rare that anyone asks. If they do ask any questions about the former occupants, it’s usually, “Did anyone die here? Has anyone been murdered here?” That’s the only questions that typically come up. It’s just not an issue. Go buy this house, go get this house subject to, let’s put this down as your first acquisition, let’s get excited. This is a good thing. Put it under contract. Let’s get it now. Don’t waste any time. As soon as you hear me say this, hang up and go get it and re-listen to the call tomorrow. Get this lady under contract. It’s over with. Grab the house. Yay!
Question:
I live in Jacksonville, Florida. I would like to transfer my vehicles into personal property trusts. When I went to the tag agency, they claim that I have to pay a $150.00 per vehicle to re-license the vehicles and issue new tags. It is certainly worth the costs for as a protection; however, I would have to pay $450.00 for three vehicles. Is there a way around this?
Answer:
Yes. Usually, yes. First of all, let’s look at what you’re doing. You are gifting your cars from yourself to your trust for estate planning purposes. Therefore, typically when it’s a gift from you to you, they don’t charge all these fees and costs. They will charge a retitling fee, but they don’t typically require new plates and all those other things. They just require that the title be retyped in the new owner’s name, which is now the trust, and sent back to you or to the lender, if it still has a lien against it for lending purposes.
So here’s what I would do. I would call Tallahassee, the state capital, and talk to someone in the Department of Motor Vehicles and I would explain your plight. I would say, “Listen, for estate planning purposes, all I want to do is title my properties out of my name into my trust’s name. I’m going to remain as the owner of the trust and, gee, all I’m asking is that we retitle this for estate planning purposes so I can be able to pass these assets on to my heirs without having to go through probate and all that stuff. So what would you advise me to do?” That’s pretty much what I would do. Tell them there’s no new drivers, no new residence in Florida; it’s just a gift from you to you. What do you need to do? Don’t complicate it; just say those simple words and let me know what happens. I’m interested in the outcome on that one.
Question:
I recorded a rental property warranty deed, but the tax appraiser won’t change my name as it appears on the tax bill, which is on their web site. I said it would be paid by the trust bank account. I was referred to some statute for exemptions?
Answer:
Well, first of all, if you do have that statute number, that can be looked up and it can typically looked up online. But you might go back to them and just ask them can they fax that over to you, you don’t have access to that information. Just tell them, “Help me out here.” Honestly, when you call these government agencies, the dumber you sound, the more helpful they are. So, if you sound like you know what you’re doing, they’re going to make you torture yourself and go look it up yourself. If you kind of raise your voice and say, “I just don’t quite understand it and I can’t hardly see anyway and I’m trying to get these things taken care of and is there some way you can help me? Here’s my fax number, sir.” Maybe you’ll get the information you need without having to go through a big hassle to find it.
But here’s something else I want you to think about. You say they won’t change your name. Most property tax offices require you to file a transfer – let’s see here, what do they call that thing – a property tax return and typically when a property has been sold it changes names; it changes names from the old seller’s name to the new buyer’s name. In this case, you’ve changed it from your name to the trust’s name. So essentially on public records it could be picked up as a sale. That could be devastating to your property taxes, particularly if this is your personal residence. No, you already told me it’s a rental, but those of you who may be transferring your own personal property, your own personal house, to a trust, you want to be careful about this one because if they pick it up as a sale they will eliminate your homestead exemption. So typically if you transferred the property last year, by usually early in the following year you have to file a property tax return. It shows the old owner’s name and the new buyer’s name and all you have to do is say that the new buyer is the trust name. When you put that down, typically they will pick it up in the trust name and it will change on public record on the web site. But again that doesn’t usually happen right after you transfer the deed. It usually happens in the following year and it usually happens because you filed a property tax return. So, this is an issue that you’ll just merely need to take up with your local Recorder’s office.
By the way, though, I noticed you did not mention the state that you live in. I advise all of you when you submit your questions to me to put the state that you live in because sometimes my question may be altered based on knowing what state you live in and my experience with those particular state laws or state issues.
Question:
With a “subject to” placed in a land trust, how should one make payment to the lender? Should I open an account in the name of the trust to make the monthly payment?
Answer:
No you wouldn’t. No you wouldn’t. Here’s what you’re going to do. I want you to set up an account anyway. I do want you to set up a trust bank account; I want you to set up an account in the name of the trust. So, it’s not going to be your name, but you will be the trustee you’ll be the trustee of the bank account not the real estate trust. What you’re going to do then is write all of your checks out of there. So let’s say that you had ten or 20 or 30 rentals, like my goal is for you at least 20, and you start writing checks. All of the mortgage checks, all of them, whether they’re “subject to,” whether you qualified for the loan, whether its owner financing, it really doesn’t matter. You are going to be writing the checks out of that trust bank account with you as trustee. You mail those to the appropriate lender, you put the loan number right there on the memo section of the check. When the lender receives the check, they open up the envelope, they pull out the check, and they see that loan number right down at the bottom. They key it into their system and the amount that they received, they stamp it on the bank, and it goes right into the bank.
The person opening the envelope never looks at who the check is from; they simply do not care. It is unimportant to that clerk and it is frankly unimportant to the lender, as well. As long as they got the payment, that’s all they care about. We don’t need to create any privacy or secrecy in who makes the payments. Frankly, sometimes people’s mamas make the payments and daddies and uncles and aunts and grandmamas and granddaddies and churches and charities and all kinds of different people make payments. So, they just don’t pay any attention whose name is on the check; they just pay attention to the loan number and who it was from.
Question:
Can you give us the names of some lenders who will lend directly to the beneficiary to a land trust in Florida? So far all the lenders we’ve approached require moving out of the trust, which eliminates the privacy protection.
Answer:
Well, this is wear finesse in our business takes over. I want you to learn how to finesse this conversation. Everybody on the call, give this a try: “Hi. I’m interested in financing my property or refinancing my property. We hold title to all of our properties in trust for estate planning purposes. We want to go ahead and borrow using the trust asset, the house, as collateral for the loan. The property is deeded in the name of the trust and we’re going to give you the trust property as collateral. Additionally, we’re going to be signing the note personally. So, you’re going to have me as the borrower and you’re going to borrow on the note and you’re going to have the trust property as collateral. Now, doesn’t that make sense?”
Well, it should make sense because frankly they’ve got everything they would have if they had just your name. They still have the property, they still have the trust, they still have everything they would’ve had. Now I’m flipping over to a section of your book. This is from Volume 4, Land Trusts, and there’s a section in here regarding borrowing using trusts. It’s called “Financing and the Land Trust.” It’s page 146 of your Volume 4 and it pretty much explains exactly what I just said. What we want to do is get the lender to go that way. If they say no, yes we have been working with some lenders who have been lending in trust. Now since I don’t know, you might be listening to this next month or next year, I don’t know that I would still be recommending that lender so what I would say is call into the office and find out who we’re currently recommending as lenders on land trusts.
First of all, we do now that Wells Fargo will do it; in fact, it’s in their guidelines and that’s the biggest challenge that you have when it comes to borrowing in trust. Most clerks or mortgage brokers simply don’t know that they can lend in trust. They simply don’t know that Fannie Mae, Freddie Mac, FHA, and VA all have guidelines for lending in trust. They simply don’t know because they haven’t looked it up. What I encourage all of you on the call today to do is have your broker or friend look it up. If they look it up, they find – voila – they can lend in trust and, in fact, when they say you have to take it out of trust that’s not in the guidelines. It doesn’t say that and what they’re doing is making things up. Like I said before, they’ve still got all the protection they could ever need right there in the fact that they’re going to receive a mortgage against the trust asset and they’re going to have you sign personally on the note. What more could they ask for? They’ve got the property back if you default and they’ve got you if there’s a deficiency when they sell it on the steps. They can come after you for the difference. Good grief, what more do you want?
Anyway, sometimes we have to educate people. We go into a lot more depth into this at our MAS training, which is Maximum Asset Shield. This is a four-day, in-depth training that we do and there’s only one more this year in August. To get more details on that four-day, in-depth training, where we actually do a land trust in class, you actually bring your own deed and we do it right there. We so a personal property trust in class, you learn how to title your vehicles into trust. We also teach you how to open a bank account in trust. We also do your living trust in class and we actually provide you all the documents right there and you graduate with a special auto-fill forms disk that allows you to fill out one page and it auto-fills all of your documents, all of your trust documents, and that is a bonus for graduating the training. So we encourage you to really get yourself signed up for that, budget for it, we’ll even do payment plans because it’s a few months before the event. So call into the office at 1-800-578-8580 and get yourself signed up for the MAS training because that’s absolutely critical to your future. And we’ll talk more; in fact, I intend to have a lender at the event who’s going to talk about borrowing in trust and show you examples and show you exactly how to do it and you’re going to have a direct resource of someone who actually does it right in trust.
Question:
I used credit partners for most of my homes that I’ve gotten a conventional loan on. Even though we are partners, generally I am the one who makes all the decisions on the homes. How do I get full control of the property back as soon as they get the mortgage on it? Is there a way to get control of the second mortgage cash back that we receive on the remaining equity of the home because the check will generally be under their name and I want to be the one to be able to cash it? This is our agreement.
Answer:
There’s a few solutions to your problem. One is, as we were talking before on all those great trust questions, you might want to put this in trust. Just merely put the property in trust, make yourself the trustee of the trust, have your credit partners and yourself as beneficiaries. Now here’s a thought. If you’re also going to be a beneficiary, it’s a good idea to have your beneficial interest held by another trust and that is a personal property trust. So let’s say that you’re 50/50 partners, you would have your interest held by that personal property trust and they would have theirs held in their own names for that matter. Now you’ve taken yourself out of the line of fire and you’ve still got complete control over the title to the property and any checks that are issued.
But you know that I feel that if you’re going to be a beneficiary of the trust, you should not be the trustee. So another solution would be to have a third party trustee and then any checks that are written you could have an authorization or a limited power of attorney signed by those other parties giving you the authority to cash the checks. So that limited power of attorney is in – it’s called a trustee’s limited power of attorney – and it is in your Volume 4, Land Trusts.
By the way, if you’re on this call today and you don’t have Volume 4, Land Trusts, and Volume 5, Personal Property Trusts, definitely you need them. Call because it’s got every form you’re ever going to need. Just like I’m describing now and I was describing a few minutes ago, you need in there.
I think that limited power of attorney…there’s also one other form in there that might work and it’s called a Trustee’s Authorization. This authorization gives you the right to be able to, excuse me, to receive any checks under XYZ Name and give you the authority to cash those checks. So just pay attention to that one because that’s a really good form. I’ve mentioned to you about three solutions to your problem today. Then the second mortgage cash back, so yeah, all of those will work.
Question:
I’ve noticed that you advocate paying off mortgages on your properties and collecting all of the income. This is a variance of other financial gurus, who often recommend, leveraging off your mortgage equity for other investments. Can you explain your reasons for this decision?
Answer:
Well, I sure can. When I teach you what is so elusive for these other gurus, it’s the fact that the seller is the bank. Now let me just say that one more time: the seller is the bank. That means when you buy a property, we take over the seller’s existing financing. If there is any equity, we get the seller to carry that back in the form of owner financing. Then we turn around and then we sell it with owner financing. We sell it on lease option, we sell it on agreement for deed, we sell it with financing. So, in other words, we now as the seller are the bank. So, the seller is the bank whether you’re buying or you’re selling.
You see these gurus don’t understand that. These gurus tell you that you go to the bank you qualify for loans. What you do is when you get equity you go to the bank and get more loans and you just basically make yourself personally liable on everything. The description I gave you of how we do business is we’re taking over other people’s financing; therefore, you have no requirement to go to the bank under my system. You have no requirement to oblige yourself or obligate yourself personally on any loan because we don’t qualify for loans we take over existing financing.
Now the other thing that these gurus don’t understand is that by paying we are using our customers that live in the property to send us payments that we use to pay down and pay off that debt. Now just think, if you continue to acquire properties the way I described and then we use our customers that live in the properties to pay off the underlying debt, eventually that property is going to be free and clear.
Now, here’s the distinction. I look at each house as its own bank. That means the income coming in off that property minus the mortgage is mine and now I can put that little difference back in the bank. Now eventually over time, say like ten years, rents should about double in the next ten years. So if I bought a property with an $800.00 a month payment and I’ve got a tenant in there for $1,000.00 a month, I’m making a $200.00 a month spread. But ten years from now it’s going to be $1,200.00 and 20 years from now, when that original mortgage gets paid off, I now get by that time – maybe the rent is $3,000.00 a month – and I’m getting all $3,000.00. See, mine is a long-range strategy. Short-range, sure, you can grab some profits and you can move on or you can use leverage.
Here’s what I recommend you do. If you do have significant equity in a single property, go ahead and get an equity line on that property. That means that you’ve merely qualified for a loan that’s sitting open. Now many of those equity lines have a checkbook attached to them. They give you the checkbook and you don’t write a check until you’ve got an opportunity. Why? Because you don’t have to pay any interest on that money until you’ve actually got an income-producing property that can pay that interest that you used the equity in another property to obtain the money for in order to buy that other property.
Now I’ve just given you a real synopsized version of my whole philosophy of investing in real estate. Frankly, I can’t find anything that comes even close to what I’m sharing with you right now. This is, by far and away, the very best and safest way for anyone to build there future.
Question:
I worked out a payment plan with a lender on a house that was being foreclosed on. I ended up buying the house “subject to.” The lender is requiring me to wire the mortgage payment to them. Is there an easier way to send them the money if they want certified funds?
Answer:
Well, I definitely would not wire the money. Here’s an idea: just ignore them. Basically, just tell them that you are a financial advisor. You’ve taken over all the payment affairs on behalf of the Jones’s and that you have to write the checks; you have no facility or ability to wire the funds, you’re using a managed funds account and you will be glad to write a check and mail it on to them. Listen, take my word for it, they’ll take it. They’ll take it. They’ll just back right down from that requirement and you won’t have any problem with that anymore.
Question:
We want to start our business from our home, but we don’t want to use our home address on the business cards, flyers, letters, signs, etc. What options do we have? Should we use a P.O. Box? I think I remember hearing that there is a place where you can get an address. Do we need to have an address in our paperwork or could we just start with a phone number?
Answer:
Well, yes you can. What we use is a private mailbox. I recommend that you go to a UPS store and get a private mailbox there. Now what they want you to do is they want you to use a very long, sophisticated address with all these dashes and dots in there, but what we do is just merely use the street address of the private mail boxing facility. So, for example, if they’re on 103 Anywhere Street, Box so and so, we just put 103 Anywhere Street, #108. Just #108 rather than saying “box” or “P.O. Box” or anything like that. Just use street address plus number and it looks like there is a storefront there or at least it gives the impression on your marketing materials that there would be a storefront there.
Now on your other paperwork, when you are renting property out, you definitely want them to have an address to mail their rent to. So that’s also what we’re going to use that box for. It’s also a good place to have all of your trusts because when you start buying properties into trust, those trusts are going to need an address as well.
Question:
Last time I mentioned that my house was on a lease option, which expires June 1, 2007. We would like to provide owner financing and keep control of the deed. It looks like that to keep the deed we would have to keep the contract as a lease option, but the tenant isn’t going to sign another lease option at a higher rate if she doesn’t get the deed. The loan is due upon sale. My CPA says there’s new laws in Florida now about recording trusts and all that other stuff I don’t quite get. I don’t want to get in trouble, but I want to be able to make some cash flow. She’s a prime candidate; bad credit from divorce and she used to work as a mortgage broker so she knows something about loans. I don’t know how else to explain this situation in writing I’m doing the best I can. I really need this situation resolved so that I can start cashing in and she can relax about wanting to own the home.
Answer:
Here’s what we’re going to do. Explain to her that it’s perfectly legal and legitimate and since she’s been a mortgage broker, she’s familiar with a form called a Verification of Mortgage. It’s also known as a VOM. On the Verification of Mortgage right there, it’s asking the lender to please verify that there is a loan number one, number two asking for the current balance, number three asking what the payment schedule and the history has been. There’s a box at the top that says “Loan” and then it says “Land Contract.” Explain to her that the loan, whether it be a traditional mortgage loan or a land contract, are essentially one and the same and what you’re offering her is a land contract until she can actually qualify for a traditional mortgage.
So, you are going to accept from her principle, interest, taxes, and interest just as if you had given her a mortgage. The only distinction is that you are going to keep the deed because heaven for fend something happens to her, heaven for fend she stops paying, then you don’t want to have to go through the arduous and tedious process to get your property back. An Agreement for Deed allows you to avoid that and that is in your Volume 10, Owner Financing. Agreement for Deed and all the explanations of it and everything is in there. You can also offer her, just to make her feel better, that all of those…you can explain to her that all of those payments she’s made she can write off on her taxes, she can get credit for the interest that she’s paid, principle she’s paid, everything. You will provide her with a calculator showing everything. You’re going to provide her with everything and in Volume 10 there are calculators there.
Now watch this. There’s calculators for fixed rate loans, but when you come to MPI, which is Massive Passive Income, which is coming up just around the corner in June, you will be able to not only give her a fixed rate offer, but you’ll also be able to give her an adjustable rate mortgage or a graduated payment mortgage. We are providing you at that event, that’s more in-depth training on selling and holding property. We actually provide you with the documents to be able to offer adjustable rate loans, graduated payment loans and fixed rate loans and we give you a special piece of software that prints it all out for you on auto-fill. We give you all the predesigned calculators where all you have to do is put all the little numbers in one particular area and it does all the amortization.
It also provides for negative amortization if they can’t start off with a 10.99% interest rate, then we can start them off on 6 or 6.5 or 7% and allow the interest to accrue on the backside to allow for the difference between the rate that we start them with and the higher rate that they’re actually qualified at. That allows for negative amortization that builds on the backside of the loan. Just like the banks do because essentially you are going to be a bank. I highly recommend, particularly because you’re in this scenario with this particular client, that you get yourself to Massive Passive Income in June because it is the rest of the story on holding and selling properties and how we work with agents and mortgage brokers and all that good stuff.
