Can you cash flow an abandoned, underwater, rejected short sale?

Question

I already know the answer is yes but let's evaluate, discuss and see how many variations of a workable solution we can create.

Scott Moyes · Answer

The assumption that most have made here is that the payments aren't current.  A Short Sale doesn't require that the mortgage is in default.  Perhaps the bank rejected a short sale because the payments were current.  If the payments are current, that means that the seller/owner has the resources to keep it that way but would prefer to stop the bleeding.  I will assume that the seller/owner prefers NOT to be a landlord and just rent it out.  Perhaps the seller/owner just doesn't want to keep making payments on an over-encumbered property.

Problems:- No Equity or Upside Down- Payments Higher than FMR- Don't want to be Landlords- Can't Sell- Seller Financing, Lease Option, etc., all violate lenders due-on-sale- Since it is no longer their primary residence, Dodd-Frank compliance issues may applyThe answer is quite simple.  I'm very surprised it has't been mentioned.  It's used everyday by local governments, municipalities, knowledgeable Agents and Successful Investors. There are only two ways to "transfer" ALL the Fee Simple Bundle of Rights of Ownership.  One is by Deed and the other is by Trust, more specifically via a Title Holding Trust Transfer™.  OK, so what does this have to do with our problem.  This method or tool will allow us to place a resident in the property who for whatever reason can't qualify for traditional financing yet, but would like to enjoy ALL the Rights of Ownership yet avoid all the inherent dangers of Seller Financing Schemes such as Sub-to, CFD, AITD, Lease Purchase, Lease Options, etc.  Again, all of which violate a lenders DOS and are subject to compliance with Dodd-Frank.Federal Law allows an owner to place their property in to their own Revocable Living Trust, more specifically a Revocable Title Holding Trust, name beneficiaries or remainder agents, one of which may agree to lease the trust property on a net basis.  IOW, they must agree to be 100% responsible for the property, including all of the payments to include PITI, maintenance, upkeep, repairs, etc.  And, as per IRC (h)(4)(d), the IRS looks through the trust and treats the Resident Beneficiary, as the owner for tax purposes.  Yep, even the IRS recognizes the benefits of the Trust Transfer™.  Better yet, it prohibits the bank/lender from calling the note due and is completely outside of Dodd-Frank.The THTTransfer™ is not an alternative to Seller Carry Type Arrangements, it is the way they are done to eliminate virtually ALL the inherent dangers of such schemes.  It also protects the asset from any further encumbrances and prohibits wouldbe judgement creditors, including the IRS, from attaching or placing liens against the property. It is like clay in the hands of it's creator.  IOW, it allows a Seller, Agent, Attorney, Buyer, Investor, etc., to mold it in any form that works for all the parties.In the example set forth by @Dave Salcido, it allows a seller to collect a higher than normal payment from a resident because the resident gets more benefit.  The Resident not only is entitled to tax benefits but shares in the future equitable growth, appreciation and even note reduction.  Being able to offer more benefit to a resident, may result in the elimination of negative cash flow.

Process:- Owner places their property in to their own Revocable Living THTTransfer™- Assigns an Interest in the Trust to ???- Creates an Net Occupancy Agreement with the 1st Right (not Option or Obligation) to Purchase to what we call the Resident Beneficiary- At some point before the end of the agreed upon term, the RB exercises their Right to PurchaseAlthough it can be used by any Seller or in any situation, this tool, if you will, really has it's place with upside down properties.  It not only protects all the parties, it allows a wouldbe seller to get Full Price, if not more, while some else covers and is responsible for the payments and property.

Regardless of the value of the property or what is owed on it, the THTTransfer™ allows someone else to enjoy the benefits of home ownership without the need for a Down Payment or the need to Bank Qualify for a Mortgage.  It provides for time for a market to recover.  It also allows a seller to delay or eliminate taxes on capitol gains, if applicable. The interest in the trust can also be exchanged as if real property.

The THTrust has been used by Henry Ford, Al Capone, Disney, our current President and by Educated and Knowledgeable Agents and Investors all across the country.

The question I get most often is... So why haven't I ever heard of this?... or... Then why aren't more people using this?  Great Question!One; because in it's current form, it's only been available for the last 30 or so years.Two; it has been a Trademarked and Patent Pending Process of Documentation.Three; until now, it's only been available to a select network of agents and investors.Four; attorneys, other than billable hours, couldn't figure out how to profit from it.Fifth; agents couldn't figure out how to get paid commissions from it.  This has since been resolved.  In fact, it had been approved and taught as a 3 hour Continuing Education Course for Agents in California.  We no longer teach it for CE Credits or to just Licensed Agents.

I'd be glad to provide any of you additional material, articles and information on the Incredible THTTransfer™ and it's myriad of uses."Control Everything, Own Nothing" - J.D. Rockefeller

Rick H. · Answer

I agree with @Steve Babiak

Until @Brian Gibbons posted, this post is a time waster.

@Dave Salcido suggest you study copywriting and learn to ask better questions! Who is compelled to help to help someone who can't seem to frame his query well and tells his would-be responders that he already knows the answer?

Steve Babiak · Answer

Because you say you already know the answer, what's the real purpose of this topic?  Others have asked for more details, and you still prefer to be vague... oh, that's because you already know the answer ...

Dave Salcido · Answer

Rick H., Your comment is duly noted. Thank you!

Peter John K · Answer

THE ANSWER IS NO if the property is underwater and a rejected short sale it is sitting in a grey area where the bank won't negotiate probably hoping the owner will get his s**t together or the bank is unaware about the recent drop in home values in that area for whatever reason....

If you could cash flow it the owner would probably not be under water.... If the house is vacant why would any right minded investor show up and think mhmm the house is vacant and worth less than it will cost i think ill just charge higher rent even though there is none there to begin with...

LETS JUST SAY there is a investor out there that has the right idea and could figure out some miraculous way to cash flow the place and convince the owner to take the loss and walk away empty handed... The owner is more likely to just delay the foreclosure and in some area it could take years meanwhile the owner could be staying with family renting out the place to pocket the cash off the books and than a few years later the foreclosure finishes and he could get bumped into section 8 (depending on location) with the bill 100% footed by his social security or workman comp assuming they are older or just lost there job because of an injury.... or no matter what the age maybe there just a deadbeat and will burn the place down and let the insurance deal with it... ALL OF THOSE ARE ILLEGAL but in my opinion probably more likely to happen in the situation posted above...

I am curious however to what the answer is @Dave Salcido or atleast the answer you had in mind when you posted i know you said something with same title equity share etc... leaving out the detail to inspire creative thinking but for some reason my creative thinking is just leading to the owner not cooperating or willing to save there credit if they can't manage the payments anyways... or was this just a trick question and my answer is the one your looking for?

Dave Salcido · Answer

@Wayne Brooks, sorry, no. There's no need to ever rent skim. Respectfully, please consider the title of this post, "Can you cash flow an abandoned, underwater, rejected short sale?". If the answer is "no", that's pretty much the end of this conversation and it's on to the next. If the answer is "yes" or "maybe", what then is the intellectual mindshare? I believe 3 examples have already been proffered in various degrees of detail. Are there more?

Wayne Brooks · Answer

If you're not taking title, it'll all just be some variation on rent skimming.

Dave Salcido · Answer

Beautiful Brian! Awesome Kerry!

Kerry Baird · Answer

Lease option out and demand higher than market rents.

Owner finance an installment sale where the interest rate is higher than the original.

Short term or vacation, rental.  Accumulated nightly rents are higher than current monthly payment.

For a long term buy-and-hold, I don't care about the purchase nearly as much as I care about the monthly cash flow.

Brian Gibbons · Answer

@Dave Salcido

Let's say it worth 500k

Owes 550

Payment 2000 PITI

Rent 2500

And let's say owners want to preserve their credit

I would say

"Would you be willing to contribute to the negative, say I pay 75% of the house problem and you contribute 25% ?"

.75 x payment 2000 is my contribution guaranteed to seller for 5 yrs

And I'll rent it out

Can you cash flow an abandoned, underwater, rejected short sale?

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