Better off liquidating property & paying taxes to get notes?

[Paul Doherty]

If I'm going to sell a property do you think I'm better off avoiding the taxes and investing 100% of it into 2 or 3 additional properties, or would I make more money by simply paying the capital gains tax on the proceeds and invest the remainder in notes?

[Account Closed]

Why don't you create your own note seller financed ?

[Paul Doherty]

On the existing house?  So to do that I'd do what, list it for sale by owner?  How does that work?

[Account Closed]

You take out a couple of ads craigslist,etc find a low cost broker, and offer seller financing 10-20% down 8% interest etc You will be holding your own note and you can sell it in 8-12 months or keep it check this out

Seller Financing and Real Estate Notes in the Dodd-Frank Era: by Seller Finance Consultants Inc. [Kindle Edition]

[Account Closed]

or this

http://sellerfinanceconsultants.com/

[Bill Gulley]

Oooops! If you're not familiar as to setting up a seller financed note, I strongly suggest you sell and invest in what you know.

Seller financing puts your equity to work at a higher rate usually than what you would get if you were to invest the cash after taxes, that is not to say the note is a better investment than buying discounted notes.

There is no RE deal that pulls the ROI that a discounted note can pull when it is refinanced shortly afterwards at the UPB or even below, no comparison, not a guru ploy on the face of the earth dealing in dirt that can compete with notes......that's why I went to more notes, LOL.

But, reality, anytime there are greater potential profits, the greater the competition, the greater the knowledge required and the higher the barrier to entry in that field.

Just buying a note isn't necessarily a better investment. A quality note, purchased at a good discount that is refinanced in say 45 days will smoke your calculator computing your ROI.

Doing that means you need to understand notes, underwriting and financing alternatives with various programs, if you don't, you can easily get stuck. Now may not be the time to switch investment modes until after the education process. Good luck :)

[Paul Doherty]

Bill G.  What do you suggest for education on the subject?  I have until November before I act - that's when the lease is up on that property.

[Bob Malecki]

Originally posted by @Account Closed:

Why don't you create your own note seller financed ?

 If not prohibited in your state, a Contract For Deed (a.k.a. Land Contract) would be a less complicated method to owner finance since you hold the deed until the borrower pays off the loan. This means that you can essentially evict the borrower if they default, rather than foreclose. Shorter time to recapture the property and less expense. 

Additionally as I understand it, the CFD would be less subject to Dodd Frank. Correct me if I'm wrong.

I know a few note investors who either foreclose or buy discounted REOs and then sell to owner/occupants via CFD.

Bob

[Paul Doherty]

Thanks, Bob - I'm in Texas and this site, at least, indicates contracts for deeds are dangerous now (after 2005).

http://www.lonestarlandlaw.com/Executory.html

"Contracts for deed, lease-purchases, and lease-options have long been traditional tools of Texas residential real estate investors. Why? Because it was easy to induce tenant/buyers into such arrangements (with a minimal down payment) and easy to evict them using the forcible detainer process if they defaulted. No longer. Since 2005, these devices are considered "executory contracts" and are heavily regulated under Chapter 5 of the Property Code. The lender, if any, must give consent. Numerous initial and ongoing requirements must be observed, and the burden is on the seller to meet these. Violation entitles the purchaser to cancel and rescind the contract and receive a full refund of all payments made to the seller. That is not all, since a claim may also be made under the Deceptive Trade Practices-Consumer Protection Act which can result in treble damages plus attorney’s fees. Add up the numbers and one can easily see that the potential downside is significant. Note that the statute contains no significant defenses for well-meaning sellers who thought they were giving the buyer a good deal, even if the whole arrangement was the buyer's idea in the first place.

Accordingly, the risks to an investor of engaging in executory contracts have nearly eliminated their use in the residential context."

Does anyone know if this is accurate/true in Texas?

[Bill Gulley]

Bob, CFDs have other issues in most states, I think Jerry W. 's neighborhood still uses them, but there are laws as to equity and the CFD circumvents foreclosure laws, then requiring a judicial FC. The DF Act covers a CFD in the same manner as any installment contract, there are no exceptions unless the state has an alternative that passed or passes the intent of the law as determined by HUD. Just saying that don't care about a CFD doesn't mean the feds don't care.

CFDs are a bad vibe deal now, the DF Act, circumvents FC laws, has title/deed issues, requires a judicial foreclosure and they can fall under predatory practices quickly, not to mention insurance and tax divisions. Use to be my favorite installment contract, had them fine tuned and now they just fell out of favor.

As to education materials, best to read the notes forum here, Dion and I have posted tons of information and comments by Ken Rischel who is a compliance guy is also good. Different tastes too, pick you poison or your witch doctor.

I'd say anyone in the country spouting off seller financing stuff would be something I'd be very suspicious of, most in RE are not finance types, they aren't underwriters, they usually view the deal as of today instead of the feasibility and likelihood of underwriting the future with a background of successful experience, like mine that had better loan performance than most portfolio loans at the banks. It is a crystal ball, you either have one or you don't.

See if those trying teach seller financing will put their money where their mouth is....probably not. And, RMLOs receive no training at all in areas of seller financing.

The problem with writing a book about seller financing is the compliance side with federal laws and then 50 state laws that can vary. Underwriting is unique and risks are different to a seller than to a cash lender and the foreclosure aspects as to securing collateral is different as installment contracts are terminated, cash loans are a secured interest that is indemnified by sale.

Study conventional financing first, seller financing follows the basics but goes more into compensating factors and credit matters that vary from conventional. :)

[Account Closed]

1. i would only use a mlo who well versed in dodd-frank.the law us over 800 pages and it is stll being written. Seller financing is stll very poplar becsuse underwriting 
2. is very strict for many potential buyers

[Bob Malecki]

Originally posted by @Bill Gulley:

Bob, CFDs have other issues in most states, I think Jerry W. 's neighborhood still uses them, but there are laws as to equity and the CFD circumvents foreclosure laws, then requiring a judicial FC. ...

 Excellent points Bill, thanks