Real Estate Investing Forums

Real Estate Investing => Bird Dogs, Wholesaling => Topic started by: freedom-now on January 29, 2005, 04:08:55 pm

Title: I have investors wanting to work with me, help with this idea PLEASE...
Post by: freedom-now on January 29, 2005, 04:08:55 pm
I have investors,  I need to know how to structure this deal.  My partner has access to money, so can we buy a foreclosure for 50K put 5K in to repair sell for the full price of 100K to an investor, give him 10K for putting it in his name place a tenant in the home and collect the difference.  How do I deal with the seasoning issue.  Or instead of purchasing the home will the bank assign it to me and sell to an investor.  Please help.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: ARamirez on January 29, 2005, 10:19:59 pm
freedom,

I am very confused by your post. I got lost when you mentioned giving the investor/buyer 10k for putting 'it' in his name and placing a tenant in it and getting a difference...huh?

Might have to explain that one a bit better.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: freedom-now on January 30, 2005, 07:45:56 am
We are giving the investor 10K up front as an incentive to buy.  And we will put a tenant in the home also. I need to know how to take the money out, cause from what I have been told is if I buy a foreclosure repair and sell I have to season it first.  Is that true.  From Michigan.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: johnmichael on January 30, 2005, 02:15:30 pm
We are giving the investor 10K up front as an incentive to buy.  And we will put a tenant in the home also. I need to know how to take the money out, cause from what I have been told is if I buy a foreclosure repair and sell I have to season it first.  Is that true.  From Michigan.

Seasoning issues are lender specific - some require it - some don't.  Some have stiff policies and some do not.

To this point in my investing carrier, I have not had any problems with this issue - most lenders just require proof of the value vs purchase and repair.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: freedom-now on January 30, 2005, 05:19:19 pm
JM, so i can purchase for 50K sell for 100K and thats that.  Any other things I should know before I do my first deal.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: miti on January 30, 2005, 07:00:01 pm
Here in Michigan, seasoning is requiered by lenders for appoving a conforming buyer.  In other words, someone who need a mortgage to buy your property.   If your investor is a 'cash' buyer, you should not have a problem.  In the future you can solve problems with a 'title holding trust'.

MITI
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: johnmichael on January 30, 2005, 09:16:58 pm
JM, so i can purchase for 50K sell for 100K and thats that.  Any other things I should know before I do my first deal.

If you can prove to the subject lender that the value difference is based upon substantial proof and that, you are not wanting to just make the BIG bucks by taking advantage of folks.

Making 50k profit on a 50k purchase good luck to you in today's market.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: joehagan222 on January 31, 2005, 07:57:47 am
$50.000.00;

That is way too much profit on a wholesale deal! I would dot all my (I)`s and x my (T)`s before I gave anyone $10,000.00 to purchase a property peroid!!!! This deal doesn`t feel right to me! If you are not sure,check out every one involved! You could be throwing $10,grand away!
                 
                             (JOE)
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: ARamirez on February 01, 2005, 10:15:08 am
Ok as I wanted to clarify in my earlier post...

Freedon,

Who is getting what?

Are YOU buying it from foreclosure for 50k or are you paying some investor 10K to get it assigned?

Both of your posts have left me wondering what kind of deal you are trying to do.

Quote
We are giving the investor 10K up front as an incentive to buy.
I don't get why you would pay anyone 10k as an INCENTIVE to buy a property.

If you plan on buying the property from foreclosure fixing it up with 5k of work and sell to an investor for 100k then great. If he is using a lender and you are worried about seasoning issues then you will need to somehow prove to the lender that the house was purchased at a deep discount due to foreclosure not because you are inflating the value of the property.

Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: freedom-now on February 01, 2005, 03:48:42 pm
AR, I guess that is why I made a posting as to what I thought was going on.  I guess I would give the investor the money, to purchase more than one property.  Kind of like an incentive.  Do you have another way where i do not use my own money and not give him anything.  
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: ARamirez on February 01, 2005, 05:19:31 pm
Well if I understand you correctly essentially you just want to quote DO the deal and make some profit. SO! IF the property is truly worth $100k (based on comps) and you buy it for $50k, invest only 5k in repairs... sell it FAST (~30 days) for 90k to an investor and make out with about $20-$25 profit after closing and holding costs.

If it is going to take more reapirs and you don't want to hassle with it cuz it may take 30 days for you to do it all alone you may want to just wholesale it to an investor as is and make $5k-$10k profit and move on to the next one. Remember you will have closing costs on both ends so account for them in addition to your profit.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 06, 2005, 09:02:26 pm
Freedom:
Anybody that is doing deals will tell you that 'seasoning' is definitely an issue.  If they tell you like-wise, they are simply a seminar graduate and don't know what they are talking about plain and simple.  After doing close to 50 deals last year, I can tell you it is a serious issue.  I had lenders not approve loans on some of my buyers because they said it was a "Flip".  This was even after I provided documentation on the rehab with before and after pictures.

Here is a solution for you.  When you purchase the property from someone in pre-foreclosure,
put the property into a Land Trust with the original buyer as the "Trustee".  You name yourself
as the "Beneficiary".  Then you simply have the seller sign assign their beneficial interest thru an "Amendment To Trust"  giving you full beneficial interest as the "Trustee".  Make sure to have it notorized.  You will need it when
you go to sell the property.  The Title Company will have you sign a "Trust Certification".

When you go to sell the property, it will appear to the lender that the original seller simply put the property in to a trust.  It will appear this way because on title it will show the original seller on title as the "Trustee" to the Land Trust.  However, the original "Trustee" assigned you their beneficial interest and have documentation to prove it!

I have used this method with great success and it should work for you as well if executed correctly.


Best Regards,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Skywalker on February 10, 2005, 07:54:44 pm
Jeff let me ask you something.  to be able to do the following ..... (Land Trust with the original buyer as the "Trustee".  You name yourself as the "Beneficiary".  Then you simply have the seller sign assign their beneficial interest thru an "Amendment To Trust"  giving you full beneficial interest as the "Trustee".  Make sure to have it notorized.  You will need it when
you go to sell the property.  The Title Company will have you sign a "Trust Certification".)
Do you contact the title company to do it?
Do you do it with a public notary?
Do you do it yourself and if so how do you go about it?
Thanks for your info!!!!
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: EZmoney on February 10, 2005, 08:18:29 pm
Are you saying you have a "straw buyer" that is willing to buy the property at inflated price ( in 30 days), and then the "straw buyer" and you split the profits. $10,000 to straw buyer for using his credit---the balance to you.

A lot of people have gone to JAIL for loan fraud. Be careful. NEVER PAY SOMEONE TO USE THEIR CREDIT.  It is called a "straw Buyer" the FBI and US Attorneys office may be calling you if this deal goes into default.

You middle man buyer may just want the $10K and never make a payment--this is called first payment default. Lender's first call is to the FBI.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 10, 2005, 08:29:21 pm
Money:
This has nothing to do with a Straw Buyer!  We don't do business like that!
In terms of your questions SkyWalker.  I have my own "Land Trust" that I use.  I use an escrow company to do all the paperwork.  It has to be done correctly so it is worth it to pay a couple hundred bucks to have it prepared for you...

You are simply purchasing the property and putting it into a land trust which you are the beneficiary of and the seller is the trustee of.  You then have the seller 'assign' you their beneficial interest which gives you full control of the property...  You then fix up the property and re-sell it to your end-user..  An 'actual' person, for full retail value..

I would recommend you take a course on Land Trusts by Bill Gatten....



Best Riches,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: EZmoney on February 10, 2005, 08:57:56 pm
Jeff,

I agree the Land Trust can work to avoid the issues with some lenders related to seasoning. Not all lenders have a problem with marking up the property to fair market value in a short period, if you bought at deep discount.

What I was referring to was Freedoms words..."put in his name".  Sounds like this isn't a arms length sale...put to a friend with good credit--to pull out cash fast.

There are ways to structure these things...so that partners splitting profits don't get into the "gray" area of finance.

As far as the land trust goes---the only reason being discussed for its use here ---is to avoid the seasoning issue on vesting on title. If a lender wants to check it out, they can still determine the history of vesting in the property (even with the land trust).
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 10, 2005, 09:13:24 pm
Money:
If you do not know what you are doing you are correct....   Let me ask you this since you appear to be very knowledgable.  What shows up on title when you put property into a Land Trust?    


Best Riches,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: EZmoney on February 10, 2005, 09:54:11 pm
On Title--it shows the owner as the Trust. Your Sale Contract should then be prepared showing the seller as that same trust--but your signature is on the contract. As I said, this will "fool" most lenders---under a quick review. A good underwriter will question the signature on the sale contract and require proof that that person was a benefical owner of the property for their vesting/seasoning period required. Yes, you can refuse to provide it, Yes, they can refuse to close the loan.

The tax bill may show the prior owners name (if you flip it in a short period)--not the trust name. If the property was on MLS, the appraiser may pick up the listing activity too. Vesting of ownership for many lenders, is only a concern for 6 months (some longer), some not at all.

Some mortgage programs do not have any seasoning requirements to use the appraised value (versus lower purchase price). In many cases, when underwriting sees a large increase in value in a short period, they may require interior photos of all rooms (to make sure the rehab was completed--inside and out).

YES--I have a lot of experience in flipping real estate. In the good old days (before vesting and seasoning concerns), you could do simultaneous closing---buy a property--use your buyers money to close on your purchase.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 11, 2005, 01:13:38 pm
Money:
As a lender, you're theory is correct.  As a creative investor, I can tell you  speaking from my experience you can get around the seasoning issues by using a Land Trust and using a "Power of Attorney" and an "Amendment" at the close of escrow.  If your documents are executed properly, it can be done.

In terms of the tax bill showing the prior owners name, it does not matter because the preliminary title report will show the prior owner as the "Trustee" on the new Land Trust that is created.  For example, if you purchased a house located at 123 Main St. from "John Doe".  When you put it into a Land Trust and the name of the original seller as the "Trustee", it would show up on title as this:

           "123 Main St. Trust, dated 02/01/05, John Doe Trustee".  

Therefore, it would appear that the original homeowner put the property into a Land Trust.  So the tax bill is irrelevant.

I am not going to sit here and debate with a lender as yourself as it is not worth my time and effort.  It is obvious that you are here trying to advertise your loan program to investor's which is not allowed on this forum.  

We all know as investor's seasoning is a serious issue nowadays.  However with proper documentation, ie, pictures, receipts, and knowing which lenders to submit your loans to, you can get around it.  This is one reason that when I sell a property, it clearly states in the MLS "Must Go Conventional" and I try my best to get the selling agent to go with my lender who I know does not have an issue with seasoning requirements.  If they demand to use their lender, then I put in my 'addendum' to the sales contract that they have 7 days to provide a letter from the underwriter who is doing the loan that they do not have an issue with 'seasoning'. I am not going to get strung along for 30-60 days and have the loan turned down because the lender say's it is a 'flip'.  I had that happen before and it turned out being my $5,000 seminar on 'seasoning'.  

Now, when purchasing from someone 'subject to', by using a Land Trust you can get around the 'seasoning' issue if done correctly.  I am speaking from several deals done this way by myself and other investors I know...


Also, simultaneous closings and double closings are still done today, you have to have just know what title companies to work with.  They are getting more and more difficult to do, but it can still be done.


Best Riches,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Skywalker on February 14, 2005, 09:44:48 pm
Sorry, to ask this but what is the main problem with seasoning...... On another topic. If I am buying a house from somebody that it is been foreclosure, now the buyer wants to close asap. How do I get around so that I have time to market the property and sell it for a profit $$ .....
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 14, 2005, 09:55:12 pm
Skywalker:
If you are buying it 'subject to', then you can use a Land Trust as mentioned above.  If you are not experienced with this, then do as mentioned above.  Take before and after pictures and make sure when you sell it, the loan is submitted to a conventional lender that does not have strict 'seasoning' requirements.
Follow the instructions I gave above.



Best Riches,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Skywalker on February 15, 2005, 10:11:47 pm
Thanks jeff for the info. Sorry to ask but what are seasoning requirments......
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 15, 2005, 10:26:21 pm
Most lenders will require you to own the house for 6-12 month's before you can 'flip' it...   This is because the loan industry did a survey and found out a high percentage of loans that went into foreclosure came from houses that were 'flipped'.  They now have strict requirements to help curtail this.

They key to have lenders that you work with that don't have such strict requirements.  Also, before and after pictures help, receipts as well as a letter to the lender stating that you purchased the house on a distress sale and a documentation of the rehab you did.



Best Regards Luck Skywalker!

Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Skywalker on February 16, 2005, 09:31:01 am
jeff let me ask you this. If most of your properties you acquire you do not buy them yourself, but you sell them to someone else before you actually close .why do you worry about seasoning. Since you are not applying for the loan but someone else is??
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 16, 2005, 10:00:05 am
Skywalker:
I buy everything I can get my hands on and:

-Retail to end-users
-Wholesale to other investors
-Rent for long-term appreciation

So to answer you question, I have to worry about 'seasoning' issues as I retail a lot of houses.  What you want to do is learn how to 'wholesale' so that you can keep buying and just 'flip' to other investors when you are at capacity with retail deals or a property is in a 'war-zone' and you don't want to deal with it.

When I first started out, I would buy a house or two, fix them up and then 6 month's later when I learned how to 'wholesale' my business took off.  I was now able to buy and sell everything that came my way.  I recommend you take a course on 'wholesaling'.  Ron Legrand has a good one.  You can but it on E-bay.


Best Regards,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: jason05 on February 18, 2005, 11:36:56 pm
So let me see if I understand this correctly... If I am buying a fixer-upper and taking the title in my name upon closing, then spending about 2 months + a few thousand dollars to make the place nice, I can't sell it because no buyer can overcome the seasoning issues with a lender??? That sounds awful... how do other people in fixer-uper business do it? Does this apply in FL, GA, TN - anyone know?

Also, If the only way around it is doing land contracts, would the title company that I use when buying be familiar with this "land contract / trust"  ...or do I have to buy some course to understand it.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 19, 2005, 10:10:00 am
Jason:
It is really simple.   You have to make sure whoever is doing the loan for the person you are selling the property to does not have an issue with 'seasoning'.  Re-read my post above...  

In terms of the using the Land Trust, if you have never done one before, I recommend you use an attorney or escrow person who is familiar with using Land Trust or take a course.... Bill Gatten has  a good one.



Best Regards,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: fiatx199 on February 19, 2005, 08:57:33 pm
You have all lost me with all these suggestions. It seems as if he's asking how his investor can purchase this home and profit.

Yet you are all correct.

I work most of my deals with investors and I use about 200 different lenders. Yes I am an investor/mortgage broker. When I have a foreclosure brought to my attention I let one of my investors know about it. We have our appraiser do a value check. If it is worth 50 to 100% more than what is owed, My investor jumps on it. I find one of my many NON-conforming conventional lenders with 100% LTV. I then put my investor through this lender for pre-qualification.  I call the lender holding the note of foreclosure for an actual payoff.

In some cases I'll negotiate a short sale. (Be careful with SS, the lender could go after the seller for the difference through a default judgement).

My investor gets a purchase agreement from the home owner as long as they are with-in their redemption period.  We submit the deal. This is legal and profitable for the investor. Now if he has no plans to occupy the property then we go for 90% LTV as non-owner occupied. Most of my lenders will allow an investor to go 90% up to 5 homes not including his principal residance. So lets do the math.


100,000.00 FMV
90% LTV
= 90,000.00 new loan in the investors name.
 90,000.00
-50,000.00 payoff
-5800 closing cost
= 34,200 to investor

On these deals I only use lenders with out the seasoning guidlines.
Just make sure you are completely honest with the lenders about occupancy and you know the law. Most title companies will only cut the proceed from equity to the seller. (you have to careful here) If you are doing a short sale, the seller can not profit.

Keep in mind this is the quick version, the're may be more issues and qualifications at play here.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 20, 2005, 01:58:43 pm
Fiat:
The term 'seasoning' refers to the amount of time the individual owns the property.  There are a lot of conventional lenders that want you to own the property for 6-12 month's.  It has nothing to do with buying a house from somebody in pre-foreclosure.  When purchasing a property in pre-foreclosure, you can go to a lender and get a loan and put 10% down and pay $5800.00 in closing costs and pull out some big money.  This strategy would work great for somebody who needed some fast cash and was just starting out.  There are a lot of downfalls to this however.  If you look at your numbers, if you were to sell this property with a real-estate agent paying a normal commission, you would have to come up with money our of your pocket!  Run the numbers.  6% for real-estate fees and 3-4% for title,escrow, etc...However, as a creative real-estate investor, it is much easier to just assume the existing financing 'subject to' so that you don't have to pay the $5800.00 in closing costs.  When you go to re-sell the property, your profit margin's are higher.  John "Cash" Locke's course is an excellent resource to learn how to accomplish this.  

The smartest thing for an investor to do is line up their own private financing and pay 10% - 12% interest with no points or fees.  10% interest with monthly payments and 12% interest "Fee Simple" meaning you don't make any payments until the house sells.  Imagine being able to do deals and not make any mortage payments until the house sells!  There is a great
resource on the internet that will assist investors in accomplishing this.

Visit www.privatelendingmadeeasy.com



Best Regards,
Jeff Adam
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: fiatx199 on February 20, 2005, 09:41:52 pm
Jeff

Read my post again, I never indicated I did not know what seasoning was. It is very obvious. Whether your speaking of term or account seasoning it's all the same. There are also a lot of  conventional lenders without seasoning guidlines. I have investors seek me out for such lenders all the time. In my post I refered to using lenders with out seasoning because my investors and myself will flip these units fairly quickly, therefore making money on the back and on the front. If I misunderstood what the original post was trying to say then beg my pardon.  The stratagy u speak of, I have used many times before, but don't mislead about the get rich quick courses that are out there, you know the saying buyer beware. You can pick up on the right people and forums such as this and with a little research you really don't need to spend 100's to 1000's for some course.

It sounds like your making a pretty good living with your investment course, so carry on and good luck to you. If you want to trade techniques in the future I'm always willing to increase my bottom line. And again I apologize for my misunderstanding of the original question.

Thanks for the constructive critique I appreciate it.
Title: Re:I have investors wanting to work with me, help with this idea PLEASE...
Post by: Jeff Adam on February 20, 2005, 11:06:21 pm
No worrries Fiat.  You might want to consider the Ezine Sponsorship that is offerred on this site.  That way you can show everybody the program that you are offerring.  I think it may benefit some folks!



Best Riches,
Jeff Adam