All Forum Posts by: Grant Kemp

We always structure our acquisition contracts to give us a 60 day option period for us to find a buyer. If we find a buyer we close on the property to purchase it then immediately turn around and sell to the buyer. If we don't find a buyer we just part ways no harm no foul. Of course disclosure to the seller is of paramount importance here up front. Be honest with them and let them know exactly what your plans are. Ultimately though its usually a win win win situation. Everyone's back gets scratched.

no problem Jerry Puckett! Wraps are a great solution and you just don't see a whole heck of a lot of info about them and how to do them. Glad to have helped!

Also, your metaphor made me chuckle out loud haha.

(apologies in advance for the wall of text, I just wanted to explain exactly how this works)

A couple of questions:

1. Was the home willed to a family member?
2. was the will probated?

If the property was willed to a family member so they are now the proper owner of it, this is how I would structure the deal: if you think you can sell it as owner financed at 200k, offer the family member a note at 6% over 20 or 30 years for maybe 20k in exchange for them selling you the house subject to the existing mortgage. This means you would be buying the house with no out of pocket money, giving them a note for 20k, and promising to take over the existing payments on the house. You could then turn around and sell the house as an owner financed house for 200k, collect a 10k down payment, and finance $190,000 to the end buyer at 8.5%. There's the wrap. You're financing 190, but you owe the seller 180 (their original 160 mortgage, plus the 20k note).

SO let's put numbers to that:

Let's say their mortgage was at 6% and they have 20 years left on it (just for the sake of this argument...if you get me real numbers I'll change this): their PI would be 1146.29 a month

Now you've also promised the seller 20k over 20 years at 6% (this is their incentive to not let it go back to the bank, and rather to let you have it). That would make you owe them 143.29/mo for 20 years.

So now, you essentially are "in it" for $1289.58/mo

But then you turn around and sell the property as a wrap. you owner finance it to someone for 200k. They give you 10k down. That's immediate money in your pocket. Now you're financing them 190 @ 8.5 for let's say a 30 year note (you can do whatever length you want here). They would then owe you $1460.94/mo for 30 years.

So what does that mean? You've put 10k in to your pocket right up front and you are getting 171.36/mo of residual income for 30 years (or until the buyer refinances).

The risk here being the "due on sale" clause which gives the mortgage company the *option* (but not the obligation) to call the mortgage due whenever the property sells. In our experience though, as long as the mortgage gets paid, the banks are not calling the loans due.

You can take the property down sub2 and then sell the property as a wrap. The numbers work out great for that

welcome to BP Kyle McNeil!

I'm here in the Dallas area as well and am partners with Scott Horne who you may be directed to a few times from this forum. He's a local RE attorney and has been doing all facets of single home investing for quite a while.

The 5 house limit you're hearing might be in regards to the SAFE act. and Dodd-Frank etc. I'm assuming when you say "close" that you mean you are the seller. If you are buying/selling more than 5 houses in a rolling 12 month period, and are doing any kind of owner financing, then you need to adhere to some extra laws as far as how you go about approving the buyers.

Other than that I know of no limits for buying and selling.

as Ed said- Do some prescreening so you don't waste your valuable time. Just make sure the people you're showing to meet some basic criteria.

When I'm showing a property I will usually walk it with them and show it to them one time through, then judge the situation. Sometimes it's best to walk it with them and then go hang out on the porch so they can talk it over with eachother without you being there. Either way, try to close the deal while you're showing it to them. Try hard (not used car salesman hard, but still hard) to get them to sign an application before they leave.

You can incentivise (new word) that by saying "if you put in the application now I'll wave the initial application fee". Then make sure they know that if they pass that application, they will pay the credit check directly (I use mysmartmove.com. They pay the website and then I am able to view the results).

If you've brought them the buyer a very general price would be about $500. You might be able to say 1% if it's greater. Depends on your relationship with them.

Also, I am not sure about in NY but for my state it's very important to note that you are not able to get a "commission" for anything unless you're an agent, so be careful using that word.

I'm looking to do the salesperson pre-licensing course online. Have any Texans out there done this? What school/company did you use, and does anyone have a recommendation?

Brian Burke : Do you work for a brokerage or just have your license to complement the rest of your investing?