All Forum Posts by: Andrew Werner

There are a couple things that you need to do to make this transaction successful for both of you. First, make sure that the buyer signs a performance deed. This in essence allows you to take the property back pretty easily and in most cases avoid the lengthy foreclosure process if he doesn't perform (make payments etc).

Secondly, you will want a servicing company to handle the payments. They will accept the buyers payments, pay you and pay your mortgage. This is all at buyers expense and helps keep you clean from the transaction.

Lastly, although the mortgage would remain in your name (and be on your credit) as long as the buyer owns the property there is a way to effectively not have it impact your dti. You can sell the property to him traditionally but have him sign a lease that is just for your file. The lease would indicate maybe a 5+ year term with 5 year renews with the exact payment that you are receiving from him. This will allow you to show a lender that you are making income off the property. Lenders understand leases and corresponding payments on your bank statement best.

Alternatively, I like to sell these properties on a contract for deed or land contract if I am selling sub2. This allows me to get the property back much faster if they borrower defaults, AND gives me something to show the lender that doesn't have the mortgage in my name still going against my dti.

This sounds like a property that will most likely have to go through probate. You need to determine who is the rightful heir to the home. That is the decision maker. If that is the son, then money should be enough to motivate him. You could structure this creatively with him (sub2 and seller carry) or just offer cash.

If the heir is not the son, get in front of that person and begin negotiating with them. Getting the son out is not the part to focus on first. First, you must focus on who is the heir and getting this property moved along to probate.

Creative finance is absolutely a skill and a game changer in the months and years ahead. Being able to create a win/win for a seller and yourself as a buyer are just two of the things that make creative finance so appealing.

There is an astounding amount of people currently in foreclosure. Many of these people got their mortgages at 4% or less. Rather than lose their home to foreclosure you could be their lifeline by purchasing their property subject to. You could even do a hybrid, if they have equity and pay them over time for the equity that they have combined with taking the loan subject to.

There are no shortage of ways to acquire property with creative finance. Subject to, wraps, lease options, seller carry back etc. Getting the skills you need to do these deals will separate you from the pack over the next few years. Not only that, it will increase your cash flow and net worth as well. 

The easiest way to do this, if your parents are willing is to have your parents pay off the current loan of $190k and begin paying them as the lender. Your equity position split stays the same. No need to jump through a bunch of hoops with the operating agreement etc. 

Now your parents will begin getting monthly cash flow from the loan payments, AND from the cash flow as an owner. 

All that is required to do this would be to draft a note and Deed of Trust (if you are in a deed of trust state) with the term, amount and rate as would be on any mortgage with your parents as the new lender. Get the payoff from the current mortgage company and pay them off with the new loan from your parents. The mortgage company will file a deed of release and your parents loan will then become in first position.

Now, that is the semantics of how it works, but I would highly advise to just have a title company or closing attorney, depending on your state, to handle the paperwork. They will make sure to get the payoff, handle the deed of release and Reconveyance recording and record your parents new loan in first position. Hope that helps.

This is one of my favorite strategies. But, it must be done properly or it can really come back to bite you. First, you are going to want to make sure you are using a servicing company. All payments from the borrower go to the servicing company and they then pay the sub to mortgage on your behalf.

Secondly, depending on what state you are in you will want a good title company to prepare the paperwork for you, or an attorney that specializes in this. I like selling these type of deals on a contract for deed because it is easier to handle and get the property back should the borrower default.

Land trusts can be very useful here as well. However, without getting too deep in the weeds would really need to know what all the particulars are of the deal and what it is that you are truly trying to accomplish.

My apologies for the massively slow reply! To answer your question, the taxes and insurance would be handled and escrowed with the servicing company. You would continue to pay yours as you always have through your own PITI payment. However, and this is key, I would still have your buyer/borrower get their own insurance policy for the amount of the entire loan (wrap and carry back) naming you as additional insured. This way if they were to have a loss it would be their insurance, not yours that kicks in. I know many will say but then you are double insured and thats not necessary. But, I have found this to be the best way to keep your insurance rating high and free of blemishes should their ever be a loss. It also keeps you out of the middle of any claims. The idea of seller financing is true mailbox money without having to EVER think about it. Hope that helps.

I don't think this is too "creative". However, I think that this type of transaction is specifically for an insider relationship. This would be an investor that you already have a relationship with that trusts you. It may be an uncle, parent, sibling or childhood friend. This deal is ideal for a working professional (attorney, doctor etc) that has good credit and money sitting around in a self directed IRA.

I'd also encourage you to talk to whoever you pitch this to about the downsides and how you will handle that should certain things happen. By doing this it shows you as more transparent, thorough and thoughtful of them and their capital. If everything goes well this is an easy deal. But, what if you can't make the additional $1k/mo for some unseen reason, or the market shifts sharply downward and you are unable to close a year from now for $350k? These are things you need to be prepared to answer for any investor. Hope that helps.

One of the ways I love selling properties is with seller financing. I love buying them with seller financing too of course, but selling them with a wrap can be wildly profitable without any of the headache you have been experiencing.

Selling the property like a slow flip with some money down...I'd say $10-$20k and for around $250k would be a tremendous opportunity for you. You could back into an interest rate by offering a PITI payment in the $2800 range. Then you would wrap your $165k existing debt and have a $85k seller carry in second position. All of this serviced by a servicing company. The rate on the second almost doesn't matter, so I would have the rate for the first and second be the same to keep it simple.

By doing it this way it gives you 3 things, cash now and up front, cash flow, and future pay day when they sell or refi. All of this without tenants, toilets and trash. It gives your buyer tons of upside and a true no qualifying loan. Not to mention in 6 months or so of on time payments you could sell the second to a note buyer and cash out early. Win, win, win!

Hey David, this is a great question. I too am in the PHX market and have been an active wholesaler for the past 25 years in this market. I think all of your questions are very natural and valid. The difficult thing is that you will most likely never know the actual answers. These sellers may have gotten in over their heads. Maybe they have too many projects going. Maybe they just got such a good deal that they wanted to double their money selling to you. What is important is that you do your due diligence on the property. If it is your first deal, hire a property inspector so that you can avoid most, if not all, of the potential surprises. Double check your comps and make sure you are comfortable with the resale for the property. And, then double check and triple check how much your repairs will run you so that you can make sure your exit is a profitable one. Once you have checked all those boxes positively, you can move on with confidence.

Awesome Lydia and congrats on getting making the jump to REI. It is one that I do not think that you will regret. As for the capital that you have saved this is even better. Way to go! Seriously most people, including myself, got started with way less or no actual capital of their own at all. That said you need to answer a couple questions for yourself: What are you looking for in a rental property? Do you want appreciation or cash flow? Are you interested in tax benefits or amortization (pay down of the loan). Do you want to use leverage or free and clear? Answers to these questions will help drive you to the best direction for you and your capital.