How To Find Off Market Deals Below Market Costs & Make a Million ;-)

Question

For finding deals and reaching early retirement, new investors can get help in their financing by utilizing Creative Finance like Wraps and Subject To. Wanting to buy that second property? Tired of not finding deals and then when you finally locate one, the bank wants 20% down? On a $400,000 property, that's $80,000, Crazy isn't it.

Here's how it works: https://housecashaz-qloag.wpcomstaging.com/bomstslo/

Instead of putting 20% down and having high lender costs, you can find deals below market, take over the loan, and save all of those costs. On top of that, when you turn around and sell it on a Lease Option, you get all of your money back right away , make a ton on money and have money to buy the next one.  Okay, it takes a little learning but here is why it works.

Here is what one of the new people I coach from Socal did with a property in Phoenix I helped him find. He has taken his training seriously. It’s a Subto (Subject To) that I helped him buy “off market” and he chose to sell on a Lease Option. This also works in CA, TX and GA. I’ve broken it into sections so it’s a little easier to follow.

He is into it for a total $15,828 cash, has some cash backup just in case, and nets $106,745 when all is said and done. Using a traditional bank he would have a 20% down of $55,000 plus $3600 in closing so roughly $58,600 in cost to buy this property. That's what the average investor does. Boring, and expensive. Cash flow averages $100 a month. Yawn!

Now we use a technique that's been used for decades, you just aren't aware of it. It's called Creative Finance. Buying below market price, not on the MLS, you can take over the seller's existing 3.5% interest rate mortgage. How cool is that! No down payment! no lender fees! Low payment! The cash flow is $700 a month. WoW!

That’s a difference of about $42,000 to buy a property. That is money he can use to buy the next one, and the next one. It’s 3 times as efficient to do the (BOMSTSLO) ™ Method https://housecashaz-qloag.wpcomstaging.com/bomstslo/b-bomstslo

Don't get it yet? That's okay, we provide a spreadsheet that lets you, run your numbers and learn how it works.  Just connect.

(BOMSTSLO) ™ Method "Buy Off Market", using "Subject To" selling on "Lease Option"

Seller Bought

Nov-21

Purchase Price

$275,000

Interest

2.65%

Down

$9,625

3.50%

Financed Amount.

Financed Amount

.

$265,375

Principal & Interest

$1,069

Mortgage Ins

$156

Prop Tax

$63

Insurance

$93

HOA

$0

He takes over Loan and

He makes Monthly Payment

$1,381

.

Current ARV

$300,000

Seller Sold Subject To

Principal Current

$252,455

Arrears

$0

Cash to seller

$10,000

Real Estate Agent Fees

$15,147

6%

** No Agent Involved **

$0

Subject To Sale Price

$277,602

.

Cash to seller

$10,000

Closing costs

$3,628

Wholesaler Fees

$0

Marketing to find

$2,200

His Cost to Buy

$15,828

(He has reservesset aside of )

(He has reserves

set aside of )

$5,000

.

He Sells On Lease Option

Interest

8.00%

Current ARV

$300,000

Lease Option Increase

$330,000

110.00%

Option Fee

$33,000

10.00%

Principal Optionee Owes

$297,000

He makes Monthly Payment

$1,381

He gets monthly Rent

$2,100

His monthly Cash Flow

$719

.

Property Mgr(Don't need)

Property Mgr

(Don't need)

None

Optioneetakes care of

Optionee

takes care of

Repairs(Optionee does all)

Repairs

(Optionee does all)

None

Optioneetakes care of

Optionee

takes care of

.

His Income From Property

Amount Underlying Loan

$233,298

When Optionee Refinances

3 YearPrincipal Paydown

3 Year

Principal Paydown

$19,157

Added To Profit

.

His Profits

Option Fee

$33,000

Cash into his pocket

Back End

$63,702

His Equity whenOptionee Exercises Option

His Equity when

Optionee Exercises Option

12 mos cash flow

$8,624

Cash into his pocket

12 mos cash flow

$8,624

Cash into his pocket

12 mos cash flow

$8,624

Cash into his pocket

Gross Profit

$122,573

Cost to Buy

$15,828

.

His Net Profit

$106,745

Jeffrey Abraham · Answer

Great post. We use a similar strategy in our Second Chance Homeowner Program.

When a homeowner has a low fixed-rate mortgage, we often recommend leaving the existing loan in place instead of replacing it with today's higher interest rates.

For example:

• Existing mortgage balance: $200,000 (30-year fixed)
• Homeowner is $50,000 behind
• Reinstatement amount: $50,000
• Closing costs: $3,000
• Program fee: $10,000

Total advanced = $63,000

We then calculate a monthly program payment by taking the total amount advanced × 11% annually, then dividing by 12.

Example:$63,000 × 11% = $6,930 per year$6,930 ÷ 12 = $577.50 per month

The homeowner's new monthly payment would be:

• Their existing mortgage payment
• + $577.50 (program payment)
• + $125 monthly servicing fee

1st Year Buyback price is 83,000

2nd Year buy Back Price  93000

This allows many homeowners to keep their existing low-interest mortgage instead of refinancing into a much higher rate, while catching up the delinquent payments and avoiding foreclosure. Every deal is different, so we evaluate each property and homeowner's situation individually to determine whether a Subject-To structure is appropriate.

Andrew Horowitz · Answer

Great information.

Andrew Dwellafy - Buy and Sell Real Estate on your terms.

Jeffrey Abraham · Answer

Back in 2007 and early 2008, before most people fully understood what was coming, I was introduced to the loan modification world by a gentleman named Mohammed out of the Chicago area.

He told me several banks were in trouble and that a major foreclosure crisis was coming. He explained that a new program was being developed to help homeowners restructure their loans by extending terms from 30 years to 40 years, reducing interest rates, and in some cases offering principal reductions.

At that time, I was living in Santa Fe, New Mexico, and I started learning the program over the phone. Later, I had the opportunity to work with an independent foreclosure review team connected to major banks like Countrywide/Bank of America, IndyMac, and Wells Fargo. Internally, the banks were even given code names after planets.

That experience is how I first got involved in loan modifications and foreclosure assistance back during the 2007–2008 crisis. It taught me a lot about how banks, servicers, and homeowners were trying to navigate one of the hardest housing markets in history.

Three of the most influential financial institutions that helped shape modern loan modification practices during the 2007–2008 mortgage crisis were:

• IndyMac Bank


After the bank failed in July 2008, the Federal Deposit Insurance Corporation took it over and created what became known as the FDIC IndyMac Loan Modification Program.


This program introduced a standardized affordability model targeting a 38% debt-to-income (DTI) ratio, using:


Interest rate reductions


Extended loan terms (up to 40 years)


Principal forbearance when needed




This program became the template for later national loan modification standards.
• After the bank failed in July 2008, the Federal Deposit Insurance Corporation took it over and created what became known as the FDIC IndyMac Loan Modification Program.
• This program introduced a standardized affordability model targeting a 38% debt-to-income (DTI) ratio, using:


Interest rate reductions


Extended loan terms (up to 40 years)


Principal forbearance when needed
• Interest rate reductions
• Extended loan terms (up to 40 years)
• Principal forbearance when needed
• This program became the template for later national loan modification standards.
• Wells Fargo


Wells Fargo was one of the largest mortgage servicers participating in the 2007–2008 foreclosure prevention efforts.


By late 2008, it had implemented large-scale proprietary loan modification programs and publicly supported a standardized national modification process, which later aligned with federal guidelines.
• Wells Fargo was one of the largest mortgage servicers participating in the 2007–2008 foreclosure prevention efforts.
• By late 2008, it had implemented large-scale proprietary loan modification programs and publicly supported a standardized national modification process, which later aligned with federal guidelines.
• Countrywide Financial (later part of Bank of America)


Countrywide was one of the nation's largest mortgage lenders and participated in the early HOPE NOW Alliance beginning in 2007.


Its proprietary modification programs and large servicing portfolio influenced many of the servicing practices later adopted across the industry.
• Countrywide was one of the nation's largest mortgage lenders and participated in the early HOPE NOW Alliance beginning in 2007.
• Its proprietary modification programs and large servicing portfolio influenced many of the servicing practices later adopted across the industry.

• After the bank failed in July 2008, the Federal Deposit Insurance Corporation took it over and created what became known as the FDIC IndyMac Loan Modification Program.
• This program introduced a standardized affordability model targeting a 38% debt-to-income (DTI) ratio, using:


Interest rate reductions


Extended loan terms (up to 40 years)


Principal forbearance when needed
• Interest rate reductions
• Extended loan terms (up to 40 years)
• Principal forbearance when needed
• This program became the template for later national loan modification standards.

• Interest rate reductions
• Extended loan terms (up to 40 years)
• Principal forbearance when needed

• Wells Fargo was one of the largest mortgage servicers participating in the 2007–2008 foreclosure prevention efforts.
• By late 2008, it had implemented large-scale proprietary loan modification programs and publicly supported a standardized national modification process, which later aligned with federal guidelines.

• Countrywide was one of the nation's largest mortgage lenders and participated in the early HOPE NOW Alliance beginning in 2007.
• Its proprietary modification programs and large servicing portfolio influenced many of the servicing practices later adopted across the industry.

The program that became the industry model

The FDIC's IndyMac Loan Modification Program is widely considered the blueprint for today's loan modification process. It introduced key concepts that were later incorporated into the federal Home Affordable Modification Program (HAMP) in 2009, including:

• Standardized borrower review
• Hardship documentation
• Debt-to-income affordability analysis
• Interest rate reductions
• Term extensions
• Principal forbearance when necessary
• Waterfall evaluation process (a step-by-step method to achieve an affordable payment)

If you're developing your own foreclosure assistance program, the FDIC IndyMac Loan Modification Program is the best historical model to study because it directly influenced the national loan modification standards used by lenders and servicers today.  Those 3 bank were the template for the programs.

Jeffrey Abraham · Answer

Thank you for sharing your experience. You bring up some great points.

Our program is a little different from the bailout loans that were common in the 1990s. The goal is to help homeowners keep their existing low-interest mortgage whenever possible instead of replacing it with a new high-rate loan.

To answer your questions:

• We can work with homeowners at different stages, including Notice of Default and, in many cases, after a foreclosure has been started, as long as there is enough time to reinstate the loan.
• Every file is reviewed individually. We look at the amount needed to reinstate the loan, the property's equity, the homeowner's ability to make the ongoing payments, and the overall exit strategy.
• Equity is very important because it provides protection for everyone involved. There isn't one fixed minimum—we evaluate each case based on the numbers.
• We also verify that the homeowner can afford the existing mortgage payment plus our program payment going forward. The objective is to create a sustainable solution, not just delay the problem.

We always encourage homeowners to speak with their lender first because loan modifications or repayment plans can sometimes solve the issue. If those options aren't available, our Subject-To program may provide another path to avoid foreclosure while preserving their existing low-interest loan.

I appreciate your insights. It's always valuable to hear from someone who worked with foreclosure rescue programs in the past.

	.
	Cash to seller	$10,000
	Closing costs	$3,628
	Wholesaler Fees	$0
	Marketing to find	$2,200
	His Cost to Buy	$15,828
	(He has reserves set aside of )	$5,000

Seller Bought	Nov-21
Purchase Price	$275,000
Interest	2.65%
Down	$9,625	3.50%
Financed Amount .	$265,375
Principal & Interest	$1,069
Mortgage Ins	$156
Prop Tax	$63
Insurance	$93
HOA	$0
He takes over Loan and
He makes Monthly Payment	$1,381

.
Current ARV	$300,000
Seller Sold Subject To
Principal Current	$252,455
Arrears	$0
Cash to seller	$10,000
Real Estate Agent Fees	$15,147	6%
No Agent Involved	$0
Subject To Sale Price	$277,602
.

.
He Sells On Lease Option
Interest	8.00%
Current ARV	$300,000
Lease Option Increase	$330,000	110.00%
Option Fee	$33,000	10.00%
Principal Optionee Owes	$297,000
He makes Monthly Payment	$1,381
He gets monthly Rent	$2,100
His monthly Cash Flow	$719

.
Property Mgr (Don't need)	None	Optionee takes care of
Repairs (Optionee does all)	None	Optionee takes care of

.
His Income From Property
Amount Underlying Loan	$233,298	When Optionee Refinances
3 Year Principal Paydown	$19,157	Added To Profit

.
His Profits
Option Fee	$33,000	Cash into his pocket
Back End	$63,702	His Equity when Optionee Exercises Option
12 mos cash flow	$8,624	Cash into his pocket
12 mos cash flow	$8,624	Cash into his pocket
12 mos cash flow	$8,624	Cash into his pocket
Gross Profit	$122,573
Cost to Buy	$15,828
.
His Net Profit	$106,745

How To Find Off Market Deals Below Market Costs & Make a Million ;-)

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