All Forum Posts by: Fade Aromolaran

This conversation has morphed a lot and I really respect and appreciate everyone’s thoughts and time, but I started this post asking for the what most of you concluded I should have which is legal advice.

I know the method works at this point and just like in every other field and specialization, real estate or not, there are good and bad approaches to the technique. As long as I know it’s possible and legal, I’m interested in learning how to do it and do it properly. I’m looking for an attorney and title company to lean on.

In regards to Pace Morby, he’s legit. I understand that you watched a single video of the content he has available but the fact that he was even willing to speak on his mistakes to the public should say enough, because he didn’t have to. Also, that mistake speaks to his lack of knowledge at the time and not the method as a whole. He’s been in real estate for 20yrs but he’s been employing this method for a few years, yes.

There is $23k in arrears and it wouldn’t be wise on my part to take on the responsibility of a delinquent note without legitimate plans on to cure it. Maybe she wants the property, maybe she doesn’t. Either way, she essentially just made $23k + the paydown that might’ve accrued while the tenant was making payments minus the two months which I think is 100% an ethical approach. This particular lady wants to rent and with a foreclosed note in her name, her credit would tank and no landlord would take and she wouldn’t qualify for a new mortgage for a few years depending. She would’ve been in this situation 5 months ago if it wasn’t for me.

There is nothing inherently unethical about the technique. That’s all dictated by the kind of person you are, and I don’t believe I am so I’m not worried.

I just want to do this the right way so if you are an attorney or title rep in the area and are interested in being a part of my journey, please let me know. Thanks!

@Chris Seveney

Thanks for the input!

I think a lot of people look at the topic from a fixed/predetermined mindset. I never really mentioned preforeclosures and this is just a tool for when the numbers don’t work out for the traditional model.

I started this post looking for guidance to do this the right way and that’s all haha

@Ron S.

Yes, this is the sole reason I made this post.

@Tom Gimer

Yes that makes so much sense and I didn’t think about that. I’ll think about that a bit more and iron that out before I get into this stuff.

No, Pace has been in the industry for about 20 years I believe, part of which was him being a GC. He’s been teaching for about 3yrs.

Rehab is negligible for this one. It needs about 2k in repairs and the tenant has verbally agreed to take it on as-is!

Thanks a lot for all your replies man! I really appreciate you

I mean I could but I really don't see the need to honestly. Pace Morby is really big in the space and he keeps all of his for the life of the loan. You should check him out man! He's great.

Again, thanks a bunch for your input man! I read your bio and it seems like you've been in the industry for a while.

To answer your question: well I wholesale as well so I have funds for that and reserves for vacancies.

I understand the concerns in your original post and respect them. I'm just thinking every form of investing comes with associated risk. It's just my job to mitigate them as much as possible. I'd prefer to do rent to own upfront for assistance on the arrears but Laurel is a desirable area and I put it out for rent and got 120 inquiries in one day. So I'm thinking even if the original tenants stop paying, I'll have reserves to carry me over through the eviction process and rent out the property again as soon as they are out, worst case.

If I have to use the performance deed, I wouldn't mind coming out of pocket to pay those recordation and transfer taxes.

Haha I do have it under contract but it's from me putting together bits and pieces I've seen on other people's contracts and a subto addendum but I'm planning on doing this at scale and want to do it the right way from the beginning if possible. That's why I'm looking for legal guidance.

Yeah man! I love to hear that you're finding a way to make it work for you!

So I actually have 2 deals that I had in mind when making this post. One of them is like a home run:

ARV: $340-350k

Principal Balance: $267k

Arrears: $23k

Payments: $1373/month

Market Rent: $2200/month

Interest Rate: 2.25% (VA Loan)

She's already agreed verbally and only needs $5k to walk away. I already have a tenant willing to put down $10k on a rent to own for $2200/month. I'm going to have all the documents I mentioned in my reply to Tom in place so the seller has coverage against any major defaults I have along the way.

I've heard of closings happening outside of a title company (my state uses title companies) but I don't actually know how that process would work and what it looks like. It's sounds kinda daunting to be completely honest. And I don't think I'd want to close my first subto that way. I may be overthinking it but I'm always down to learn more so if you don't mind shedding more light on it for me, go for it!

Hey,

I really really appreciate the time you took to reply to someone you don't even know haha.

To speak on the points you raised, I'm naturally a precautious person and thought about the concerns you brought before deciding to move forward with pursuing these deals. Those are common issue that come up and that I've heard from other people's experiences. I eventually found a company that solves that exact problem and it's called Equity Assurance. It's essentially a company that exists just for these types of transactions and the co-owner, Pace Morby, owns many creatively financed properties. You pay 1% of the purchase upfront at closing and you have what's considered "equity assurance" over the property. if the note is called due, they will refi your property with a note mirroring the terms of the original and you will just make those payments to them. It's a great business model and in that sense, I would have access to the funds.

The second issue I saw you raised had to do with poor underwriting and I would have a performance deed in place to essentially have the deed automatically revert back to the original owner 60 days after a missed payment if, let's say, I miss payments due to lack of cashflow. I would have a document like this in place to prevent the owner from having to foreclose on me. But whether the market is up or down isn't as relevant to the way I plan on using it because I plan on owning them for a long time. The cashflow margins are my primary focus. And when the market crashes, the rental market actually tends to go up from what I have heard.

Regarding the insurance, my plan is to get a brand to rental insurance policy, making me the primary insured and seller the additionally insured, which is what Pace Morby teaches. This to prevent red flags and make sure when you need to file a claim, the check is issued to you/your company. I've heard of the land trust approach and have found this way is unnecessary if done correctly. My goal with this is to create win-win situations and although I do see a huge opportunity with this, I would also want to make sure that everyone involved in my transactions are taken care of, including the title company with the title insurance so we can all make money together!

I just need someone who understands and can draft the paperwork, and someone I can close them with haha.

I appreciate your input! Thanks a lot for sharing your experience.

With all due respect, finding them is going to be on me and my responsibility. I just need someone that can give me the respective paperwork and someone that can close them.

I believe it's just like anything. Some people have failed in the past and some have been successful. If I adopted that mentality, I would just leave the investing space as a whole.

But again, thanks a lot for your input man because everything is something to consider!