I am normally one to shun get-rich-quick schemes and guys like Armando Montelongo (selling $40,000 seminars to newbies…ugh)
But his brother, David Montelongo (who is known to be more honest than is brother - LOL), has this system called the Deed Flipping Blueprint that caught my eye. I don’t think I would buy this, but it does seem like an interesting concept.
And on his main page, http://www.deedflippingblueprint.com/ , he talks about how important owner financing is, etc and talks about giving solutions to people whose mortgages are underwater. So…
Here is what I think…I imagine David is approaching buyers in newer neighborhoods, offering to buy the home on a subject-to basis (this would work for people who owe more than the house is worth, or not), uses paperwork that is designed so he is not liable in any manner if the bank takes back the property OR if their is a default of some sort, advertises the house at a slightly higher price than it is really worth, sells it on a wraparound mortgage, collects a $10k to $30k downpayment (that’s where his “real” profit is) from the new buyer, and earns a little on the cashflow each month from his note. His financial figures show that he earns a pretty nice living doing that…hell, it’s better than my main business. I make a nice six figure income, but not $736,000 in the last 12 months. LOL. But again, financial figures like that always should be taken non-literal until proven. However I have talked to David personally before (about something not related to this)…and he came across as a very honest guy, so I personally doubt he’s fudging his numbers.
What do you guys think he is doing? What I concluded, or something else?
It’s called a “mortgage assignment” or “super wrap retail.” Investor buys preferably sub2 then sells to end buyer using a seller financing device such as a wrap, an agreement for deed or land contract. With a mortgage assignment you’re in and out. With a super wrap retail you stay in the deal and get monthly cashflow and/or a back-end profit when the end buyer sells or refis. Very similar to a cooperative assignment or sandwich lease option with the obvious difference being you are doing an actual sale upfront instead of a lease with the option to buy.
This is not a new strategy, it’s been around for ages. Most real estate investors don’t do it because they don’t take the time to learn seller financing…most investors have their wholesaling/rehabbing blinders on.
I don’t know anything about David Montelongo but I suspect if he’s actually doing these deals and not blowing smoke then he probably knows what he’s talking about, plus the course is only $197 so it won’t bankrupt you in any case.
So, now they’ve got the super duper ‘wrap retail’ strategy…? Otherwise called a plain, old Sub2…?
“Mortgage Assignments” are thee stupidist, short-sighted, fast-buck operator horse manure that any responsible, if not ethical, flipper should stay away from.
Meanwhile, I’ll bet there’s no backup plan on the ‘mortgage assignment’ scheme on what to do when the seller’s credit gets trashed after the buyer we put in decides to quit paying on an upside down loan, and subsequently squats until the bank forecloses. tsk tsk tsk.
Search ‘mortgage assignment’ on this forum for a detailed analysis and discussion of this irresponsible, reckless lawsuit-waiting-to-happen type of b.s. it is.
If person A buys a house subject-to, from the original homeowner with a mortgage (let’s call him person B), and then sells it via a wrap around mortgage to person C with a BIG downpayment of $15k+… but technically it’s NOT a wrap around mortgage because person C becomes responsible for paying the note to person B’s original mortgagor because of some “mortgage assignment” paperwork signed by persons A and C (note: it’s state specific & legal, as drafted by a real estate lawyer), person A walks away with their profit of $10k (what’s left over after closing costs … say it was closed at the real estate lawyer’s office and there are some back due property taxes - 15k-5k=10k)…and fast forward two or three years later - and person C defaults on the original mortgage because they get a divorce or lose their job.
How is that person A’s fault in any form or fashion (assume the lawyer inserted clauses in ALL documentation to dismiss any and all liability towards person A from all other parties)…or how is that a “stupid, short-sighted, fast-buck operator horse manure” type of transaction when person C is 100% responsible for defaulting?
That kind of logic is what I tend to see when a tenant gets angry at the landlord for evicting them - when the tenant is the one who fails to pay the rent. =) However maybe I am confused on how a mortgage assignment works …?
I can’t figure out exactly what your scenario is, but the threads I posted should answer your question.
Meantime, putting two amateur parties together on a Sub2 deal, including transferring title directly from one amateur to another amateur, is ridiculous.
Maybe I’m just too careful, but without a professional, like myself, baby-sitting this deal (for a gargantuan profit, of course), the likelihood of these two parties parting in good faith is nil.
One or both of these parties will be screwed so bad, that the ‘arranger’ of this deal, the same one who walked away with several thousand dollars of everyone else’s money, better protect himself legally, because again, one or both parties will sue the 'arranger’s" butt off for any number of reasons, not the least of which putting the seller in a position of having his credit completely upended.
You know if you really want to do the mortgage assignment thing, then go for it. However, if you’re not going to stay with the deal, you’re setting yourself, your seller, and your buyer up for grief, or worse…
Frankly, just a few mortgage assignments gone bad, is just the thing needed for the government to abjectly outlaw ALL ‘sub2’ transactions.
I tend to agree with Javipa on this. WHEN (not if) you eventually get sued for doing a mortgage assignment you’ll probably lose, despite what paperwork you have signed by whoever.
“I don’t remember signing that”
“I didn’t know what I was doing”
“I want my house back”
“He didn’t tell me I was actually deeding my house to a stranger”
etc. I’m looking to get into sub2 more in the near future and I plan on staying in the deal. If the deal is that skinny to where I can’t get at least 2 of the 3 profit centers (front end deposit, monthly cashflow, back end on the cashout) then I’ll push for a cooperative assignment or simply won’t do the deal. Way too much legal exposure with those mortgage assignments.