Investor · Baltimore, MD · Member since 2015 · 71 posts · 24 votes
Hello Everyone
I was looking for some feedback/advice on a deal. I Have a homeowner who is interested in selling me their home in the west Baltimore/ Upton area. I got the lead thru a handwritten letter (yellow letter of sort) I presented the seller 2 offers (one owner financing one cash with wholesaling in mind) one 8k cash and one for 15k with terms with 5% down. I do this cause after speaking to some wholesalers in the Baltimore area they never offer terms. I Use terms as a way to build a rental portfolio without having to put much or even any money. Anyway im offering them 15k over 4 year with no interest paid . My question is how do I write a contract for this or should I just have a real estate attorney (instead of a tittle company) write up the documents and close the deal. Also does anyone know any good real estate lawyers in central Maryland that works with investors if so let me know.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
A title co usually has an attorney in their network that drafts things for them. Use a mortgage / deed of trust not a Land Contract or Contract for Deed.
I'd forget about 'no interest'. Can cause a lot of problems with the IRS and their imputed interest calculations. Not worth it on such a small amount. Just pay market rates @Christopher Haynes. Reduce the price a little if needed maybe.
Baltimore, MD · Member since 2016 · 51 posts · 28 votes
10y
I strongly recommend you have a real estate attorney write up the contract. I don't have any leads right now on an attorney, but I'll let you know if I find one.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
A title co usually has an attorney in their network that drafts things for them. Use a mortgage / deed of trust not a Land Contract or Contract for Deed.
I'd forget about 'no interest'. Can cause a lot of problems with the IRS and their imputed interest calculations. Not worth it on such a small amount. Just pay market rates @Christopher Haynes. Reduce the price a little if needed maybe.
Rental Property Investor · Waldorf, MD · Member since 2015 · 155 posts · 76 votes
10y
@Christopher Haynes call an investor friendly title company. Like @steve Vaughan said, they should have an attorney on staff and/or standard contracts they use.
Investor · Baltimore, MD · Member since 2015 · 71 posts · 24 votes
10y
thank you @Lisa S. and @Kim Coleman , I guess im going to make a trip to dulaney tittle and ask them about the closing process. @Steve Vaughan thanks for the irs info, that saves me a lot of trouble ill give them 3% since they were ok with ) interest they should be happy to get a bit more extra. I would really like to keep the deal as I already have somebody willing to rent from me giving me good cash flow.
Rental Property Investor · Waldorf, MD · Member since 2015 · 155 posts · 76 votes
10y
@Christopher Haynes you are welcome. Safe yourself some time and just call Drew at Dulaney. He should be able to advise you over the phone. Great job on negotiating this deal. I hope it works out well for you.
Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
10y
I believe that a seasoned investor is smarter than most lawyers and title companies out there when it comes to creative real estate investing - contract engineering and contract clauses.
Forget about the so called problem with a no interest mortgage - it is NOT YOUR PROBLEM and in my advanced creative acquisition and knowledge (;-) of this business (just kidding) - it is a very good idea to make your offer on seller financing clear and in writing. There are times when sellers just don't care and will let you pay off the debt without interest. Oh, and at times you can ask the seller to give you money to buy their building.
The clause I use when negotiating for a principal mortgage goes like this "Seller agrees to hold a $15,000 first subordinated principal mortgage with payments of $250.00 a month for (divide $250.00 into $15,000) 60 months.
I would also use the follow - the mortgage shall be fully assumable without qualification
The buyer reserves the right to substitution collateral of this mortgage anytime during the life of the mortgage. What this means is that you can move the mortgage to another property to free up equity. So if you refinance the property - or sell it you do not have to pay the mortgage off.
If you sell the property you can do a wrap around mortgage, that wraps the amount of your no interest mortgage and your equity and charge interest on money you owe. Your yield will be very high.
Make sure that the mortgage is fully subordinated - meaning that if you get a new first mortgage the interest free mortgage will be moved to second position.
Also make sure you have "first right of first refusal" in the event the mortgagee decides to try to sell that mortgage, you have the right to buy it at the offered discount.
The best thing is to not have a mortgage on the property from the seller - just a promissory note.
You could also offer to pay prime interest rate to the seller - this is the interest that banks borrow
OK - all that above is my opinion. Have fun this is a great business -