Ok folks… I know alot of people on here say its not right or illegal to this and that… But I am really wondering…how many investors still cheat alittle…
This includes, finding tax loopholes, cashback not on HUds, buying OO when its NOO, etc…
lets see how many really go into the gray areas…as for me
I go into the gray areas sometimes.
so be honest here…
Yes, I am an honest investor. There is no reason not to be. Doing something illegal is simply foolish and will catch up with you eventually.
Using the tax code to your advantage is not only legal but is the only smart way to conduct your business. You and I did not write the tax code but it is our responsibility as business owners to utilize all the tax laws (loopholes) to our advantage. Paying mor tax that you legally owe is just plain dumb!
Mike
tax evasion is illegal. tax avoidance: avoiding paying more taxes than you legitimately owe, is not.
First of all, cashback not on HUDs and buying OO when it is really NOO are not gray areas. It’s black and white, and illegal.
Second, please go into full detail about these so-called gray areas which you “go into sometimes”. Post it all. Is it inconceivable that your postings on a publicly read board could ever come back to haunt you? Would you be willing to state that you have committed loan fraud and give the details?
If you want to cheat, go for it. Cheat on your loan app, cheat on your taxes, cheat on your wife, while you’re at it. Maybe somebody somewhere will give you a pat on the back for it. Maybe not.
just ask a mortgage broker that works with investors about how many of them use oo loans on noo properties.
What is an oo loan and a noo laon
oo = owner occupied
noo = non-owner occupied
Keith
Thank for the info.
not that i’ve ever done one, but i don’t think it’s totally honest to do a lease option where you’re letting people believe that they will exercise their option, if the vast majority of them never exercise their option in the end and wind up worse off financially as a result. not saying i wouldn’t entertain the idea, i just don’t think it’s fully honest.
another thing many people probably see as at least slightly dishonest, or maybe just morally questionable, is convincing people to loan to you, through such methods as sub2, in a position where a bank wouldn’t touch you. if there is a reason they are doing this loan to you (like they know you, or they are family, whatever), that is different. but if you have no down payment, crappy employment, and horrible credit, a bank wouldn’t touch you because you are too risky. to go and get a loan, in the form of a sub2, solely by convincing the sellers it is safe, seems immoral to say the least. again, not saying i wouldn’t do it if hte opportunity presented itself, but it doesn’t seem fully right to put people into a lending position when a much more risk-aware institution would not take the chances. if the people loaning you the house/selling sub2 know your riskiness but still go for it, i guess i really don’t see a problem. if they go into it thinking you’re more reliable than a bank, who does this stuff day after day, thinks you are, that doesn’t seem very right
JD,
It is not unethical or immoral to do lease-options even though the majority of tenants will never exercise their option. The fact that renters are fickle and frequently don’t follow through is not my problem and I can sleep quite well when they don’t exercise their lease and I keep their option premium.
It is also not immoral or unethical to do Sub 2 or owner financing even though the investor has bad credit. Everyone involved in these transactions are adults and should be responsible for their actions. Personally, I would not loan money to someone with poor credit and I wouldn’t take on someone as a partner if they had poor credit (or a criminal record).
Unfortunately, we have turned into a society of victims. People aren’t able to take risks or make decisions without blaming others when they lose.
Mike
haha don’t get me wrong, i’m not saying i wouldn’t do either strategy, but the strategies inherently rely upon getting things out of people that you wouldn’t normally be able to do. this is going to lead a lot of people to do less than moral approaches, for instance, getting a house subject to the existing financing from an elderly couple. is this illegal? probably not, i’m in no position to know for sure. however, if a bank would turn you down without thinking twice, it is because they know you are risky. you have a much higher likelihood of convincing a sweet old couple to ‘sell’ their house to you subject to than you do a middle aged businessman working in finance. you don’t necessarily need to lie to them, but i’m sure you can see how these deals can be put together in ways that you’d be embarrassed to explain to your parents.
again, i’m not trying to upset anyone who does this. there are definitely more moral approaches. everyone plays by the same rules (laws), and some people play more aggressively than others. it’s just some approaches almost seem to reward you in correlation to how unsophisticated the sellers are. again, i fully intend to try lease options when i have places to rent, and i’d take a house subject to in many circumstances. BUT, there are circumstances where it may be legal, where i wouldn’t feel totally comfortable (you know what, i actually think that the person who does take a house sub2 must feel somewhat comfortable to justify this to themselves. i don’t think people do it thinking they are gonna screw anyone. but, if a bank wouldn’t touch you with a 10 foot pole because of your riskiness, even if you have good intentions, it seems at least a little immoral to make old people like you enough to go on a limb, trusting you, by ‘selling’ you their house sub2. i mean a bank is afraid of the riskiness, so clearly there is reason for concern. even if you have the best intentions, you need to realize that you are putting the elderly people in question at a level of risk a bank wouldn’t take, with an amount of money that is much more significant to them than the mortgage would have been to the bank). not saying these deals are all unethical, but i’m sure you could craft these in a legal manner that you may later be ashamed about. imagine if you ruined the investment, and instead of you taking the fall, the elderly couple in our example did. and they did because you got them to trust and like you, and now you just showed how much of a mistake that really was)
also, ethical and immoral are really opinion ideas anyways. if you’re playing within the constructs of the law, play aggressively. i plan to. on the other hand, i have areas where i won’t play aggressive, adn one of them is definitely with the elderly.
you can make a lot of profit from people it seems, and negotiation is key here. i do not feel bad taking lease option money from younger adults. hell, getting screwed with credit upon receiving my first credit card ended up helping me out financially (with the lessons i learned). however, even i was in a situation where i knew i could make a ton of money off some older couple, i wouldn’t because of moral objections. if a little old lady was a total recluse, and never left her house or talked on teh phone, and had no idea that her house, that she paid 100K for, was now worth 500K, and i was trying to buy it, adn she said she wants at least a 10K profit, i couldn’t ethically just give her 110K and walk away feeling okay about it, even if the law permitted it (i’m sure there’s laws against such blatant things, but you get what i’m aiming at here)
another thing is that you could, while structuring a lease option, even without lying, completely mislead them about their chances of actually owning. there is definitely a moral way and an immoral way to present this. i’ve worked in sales for a bit, and know that i wouldn’t go as hard as i could in certain situations here, because even though they could have known better, i would feel i clouded them too much to let them really see how things are. i could pull it off legally, but not ethically. i do see tons of room for money in an ethical way here, as long as they enter into the agreement with a realistic understanding of what is going on. but if i give the figures, and then talk up a storm adn give them a different impression, i don’t just figure ‘hey, they should know better, the numbers are available to them’, i would feel i definitely contributed to getting them into the agreement by false pretenses. there’s definitely a huge range from totally ethical to probably unethical by most people’s definition here depending how you conduct yourself. unfortunately you can make a lot more by misleading people. just because everyone plays by the same rules doesn’t mean you can’t play ‘cheap’, you know? video games have rules, but people can still play them like total dickheads if you know what i mean. doesn’t reallymake it right, even though it is ‘allowed’
At The Campbell Group we only deal in fair and honest relations.If its not above board its not on our books.Tax looholes are not illegal they are simply that A LOOPHOLE.Why buy OO when you can pay cash .Or if your not going to pay cash if you cant get the funds to go investor loan you probably dont have the funds to rehab so you will loose your butt anyhow and you dont deserve to own anything.
People with good credit (per high credit standards) don’t need individual investors. They can just go into a bank, or better yet, credit union, and get the loan they need without much trouble. People who do lease-options are more than likely ones who always used their money for the rent first, and might have messed up some other credit along the way. Yes life does happen and to many. Sometimes money goes in the gas tank before the bill, hoping to pay it later. When paying the rent first to landlords, it never goes on your credit report, which is what the banks want to see. A lease-option gives one hope of using those payments to get a loan on the house later, and also gives them motivation to work harder on any credit issues if they need to. It is another option giving those not so perfect (under the credit score rating system) people a chance to still buy without being scrutinized. It gives them hope of ownership which they otherwise might view as impossible.
JD-
I hope I’m really just misunderstanding your posts. Is it me or are you completely contradicting yourself? Let me start by saying you are completely at right to voice your opinion, but just go back and read your posts. They usually begin with " I don’t think it’s right or ethical" or I would never… to an elderly person" So deceiving someone as long as there not a senior citizen is ok because
"hell, getting screwed with credit upon receiving my first credit card ended up helping me out financially (with the lessons i learned).I don’t get it. So screwing a younger person over is okay. Or doing a lease option is borderline ethical because the person statistically won’t exercise their option? I believe the purpose for a lease option is to get people an opportunity to obtain a home who need to repair their credit or save more money. I’m really not trying to attack you but bottom line is, there is no age limit when deceiving someone or “clouding” their judgement is okay. Karma will come back to bite you hard if you don’t find out where YOU stand. But the methods of Sub2 & LO are not to create a win/lose deal, and I think most would agree to that. And how does it make it any better to have a friend or family member loan your poor credit/poor income ass money any better than anyone else? Are you saying that you would never leave them high and dry but it might be possible if it were someone else. I’ve seen better “brain-on” posts from you before and I know your capable, but think about what I’m suggesting as completely constructive.
if you’re going to be picky, we might as start at the beginning and cover all the bases.
Taking $120,000 in tuition from students, leaving them with a life time of debt and not providing any financial education or the means to make a decent living is also less than honest.
What about parents who don’t teach their kids good work ethic [or manners] or that if you’re paying for an education, you should take up something that pays well.
And what about state licensing boards that hand out real estate agents licenses like candy? What about the agents who’ll say anything to make the sale?
Now getting to the point you’ve made, i’m not anyone’s mother, teacher or agent. If they think they’d like to buy the house, then i’m there to help them. And if they decide homeownership is not for them then they’ve only lost a few thousand dollars - much cheaper than buying a house.
Investing is a zero sum game. Your gain is someone else’s loss. there’s nothing dishonest about it. Thats the way it works.
however, doing something illegal will land you jail. [and if the IRS doesn’t get you, Karma will!]
sorry i am sure they were all over the place, i had just written a 10 page letter to my brother before doing that, i’m sure i went all over the place, i apologize.
yes, i am saying that there are situations where i would do something to younger people i wouldn’t do to older people. age does matter, at least to me. for instance, there is a very old lady who works for me. i manage a store within a large corporation. i have to cover up things that i would otherwise be forced to fire her for all of the time. these types of things everyone else in my store gets in trouble for (and people have been fired by me before for). however, she does get special treatment because, and only because, she is a sweet old lady. i would lose my job before firing her, no joke. this is because she wouldn’t learn a lesson and get a better job if i fired her (like a younger worker likely would); she would just spend her last days living on pasta or whatever she could afford.
your post seems to say there is no rational way to justify doing something to someone based on their age. i just disagree i guess.
why does it matter if it is a familiy member? why is that more ethical? because a family member knows your situation much much better, and hwen they loan to you they would have a clearer picture of your likelihood of default than you would likely portray yourself as having when hyping the deal up to the elderly couple in my example. your family would ignore a bit of your credit un-worthiness on behalf of your lifetime long relationship and goodwill, whereas you could conceivably give a false impression of yourself and make an elderly couple believe you are more trustworthy. your family knows who you are, and thus has a better understanding of their risks than soem couple you razzle and dazzle over a relatively short period of time. how can that not make a difference?
karma? well, karma is a belief, nothing more. not quite sure what religion or wherever karma is from, but to be honest, that really only matters to someone who believes in it.
the purpose of lease option is to give someone the chance to own their home? maybe that’s what you tell them. the purpose of a lease option, as far as investors seem to be concerned, is to get money up front for teh rental of a property, and to get above market rents. am i missing something? you’re saying that the purpose for you is to just help people? i guess that just seems silly to even say.
was i contradicting myself because i said i think they’re partially immoral or ethical and that i would do them in some circumstances anyways, or because i think it’s okay to do it to a younger person but not an older one? i don’t think either is necessarily contradictory. just because i think something is kind of immoral doesn’t mean i wouldn’t do it. i don’t pretend to follow my own morals or ethics 100% of my life. if i have to bend a moral slightly, but the payoff is huge, i’d be pretty likely to do it. about the age thing, it isn’t contradictory to feel a certain behavior or activity is okay to do to younger people, but not to a senior citizen. ‘adults’ are not some homogenous group. older people’s lives can be affected much, much more severely by some newb takign their house sub2, when he doesn’t really know what he’s doing, and then messing everything up.
well, i don’t know if i’d say most would agree to that. i can tell you that i don’t agree, and neither does the guy who posted right after you:
it’s hard to say lease optioning is a win/win (which is what you are seeming to imply by saying it is not a win/lose proposal), when the OVERWHELMING majority of people who do your lease option come out losers. just because 1 out of 10 comes out a ‘winner’ doesn’t mean this is a win/win game. let’s also remember that teh one who comes out a winner just gets a house at about market price i would imagine (less what htey have already paid you towards that price), you get above market rents and down payments to keep, which are way above market.
no disrespect, but the way i see your statement is that you believe in karma, so you tell yourself this is a win / win scenario. it is not. niravmd summed it up well, this is investing, whihc is a zero sum gain. if you are a developer, sure you can do stuff win win. sure, even lease options can be constructed win win. but if you’re keeping way-over market rents on the vast majority of your clients, adn still saying your system is win win, it looks to me like you’re just clouding your head because you believe in karma, and it is tough to do what you are doing if you call it what it is.
This isn’t uncommon, i see this here and there through some of the less wholesome approaches. for instance, a guy i know of makes a killing purchasing homes from people who are about to be foreclosed upon at significant discounts. he calls his company (words changed but the point is the same, if i give the real name you’ll be able to tell exactly who i’m talking about) “citizens helping each other”. again, i changed the words but left the meaning totally unchanged. how dumb is that? you’re not in this niche to help those poor preforeclosure people, you are in this niche because it is the niche overflowing with many people who have a need to get out of the property, even if it means that they lose all their built up equity.
i’m not sure the exact reason you think i’m contradicting myself, but i think it boils down to the fact that you and i would both do many of the same deals, yet i say ‘although i think this is kind of unethical, i am still willing to do it’, and you say ‘this isn’t unethical, by doing a lease option i am helping to create a win win scenario for me and my client’. seems to me you’re making a contradiction, not me. i’m calling it like i see it; does this post make more sense (my first writing of hte day, hopefully a little more coherent than last night. i apologize for those cloudy posts, again i was fresh off a long ass paper about some serious issues to a fam member, my hands and mind were totally shot)
Not to turn this into an ethical debate or anything but a few points I’d like to chime in on:
The first is Karma. You may or may not be religious, but the fact is that you cannot be religious and not believe in Karma. That is irrespective of what religion you believe in. Karma is simply that good things happen to good people and bad things happen to bad people. Every religion states that you have to act a certain way to go to heaven, Valhalla, the ‘after-life’ or whatever. By doing things counter to that you go somewhere else or get reincarnated as a bug or whatnot. You can’t be religious and not believe that you get what you deserve. Otherwise, what’s the point of following doctrine, litergy, theology or anything else. If it’s not ‘you get what you deserve’ then it’s all chance or predetermined fate. If it’s chance or predetermined fate then your decisions don’t matter. If your decisions don’t matter then there is no point in ‘doing the right thing’ EVER. Now if you have no religious beliefs then you can still believe in Karma, although the argument then becomes, ‘what is deciding the outcomes’ but that’s another story.
Also, to say that age matters should be clarified. If you are giving the lady special treatment because of her age (i.e. things she does would get others fired) the I think that is 100% wrong. But that’s my opinion. I personally don’t think age matters with the following caveat. That being, you should not take advantage of someone who, because of age, doesn’t know any better. For instance, you wouldn’t take advantage of a 7 year old because they lack the experience or knowledge to make an informed decision about a subject. But within adults and those (of any age of majority) that are not ill-equiped to make a decision (i.e. have not lost their faculties) then I think it’s wrong to give them special treatment based on age.
All that leads me to this statement.
If all information is fully disclosed then it is NEVER immoral for two consenting parties to make a decision that they both agree to. If there is duress on one party that is not caused by the other participating party then it’s not immoral. Some would argue that a seller in distress can’t make a rational decision and thus can be taken advantage of. I would argue that unless I am the one causing their duress, then any decision they agree to with me is not immoral because they are 1) capable of making their own decisions and 2) are consenting to those decisions and 3) there is no information that I am hiding from them.
Too many people in this country play the ‘victim’ card when in reality it’s lack of effort on their part that caused the problem. That’s their fault, not the other party’s.
no, if everything is fully disclosed it is legal, it can still be immoral. immoral is an opinion, you can’t say someone can’t think something is immoral.
look, in other forms of investments, there is something called SUITABILITY. Even though all information can may be present to a potential client, that client needs to be sophisticated enough for someone to deal with him, otherwise they turn him away. by your logic, this is a dumb rule. i disagree, i’m sure many agree with you and many agree with me
Back to the OP’s question …
Ok folks… I know alot of people on here say its not right or illegal to this and that… But I am really wondering…how many investors still cheat alittle…
I wonder how many investors who view themselves as honest and stay within the bounds DO cross the line a legality. For instance, even though hanging bandit signs may seem like a trivial act, if your city’s/county’s ordinance prohibits such a thing, you have in essence done something illegal. As one poster commented on about another issue being not grey, but black and white, so is this.