Posted by GL(ON) on April 14, 2004 at 12:29:03:
They wouldn’t in the 70’s either. You had to be sneaky about it. If you got caught, technically you could be guilty of fraud depending how you did it.
Cash at Closing? How is this possible? - Posted by Steve
Posted by Steve on April 12, 2004 at 01:05:07:
I was watching the Carlton Sheets infomercial earlier today, and it mentioned how you can get LARGE sums of “cash at closing.” One example showed a check for $47k. How is this acclomplished?
Now, I understand the basics of REI, so when I heard about “cash at closing,” the first thing I thought of was flipping the property using a simultaneous closing, and walking away with a check for an average of $4k-10k. But the example above for $47k doesn’t match up with that technique. Is there something I’m missing? I’ve been visiting this board for a while now, and I haven’t heard of anyone walking away with cash at closing for THAT MUCH for a flip!
Can someone please clarify? I’d really appreaciate it. It’s been driving me nuts. Thanks in advance!
Re: Cash at Closing? How is this possible? - Posted by jasonrei
Posted by jasonrei on April 13, 2004 at 19:27:27:
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Could flip the deal at closing and get a spread. I’ve never done this.
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Some lenders will finance more than your purchase price. I usually get up to $4000 at my purchase closings when I use hard money. Yes, $4k isn’t anything like $47k.
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I’ve bought houses using private money, where I borrowed 80% of ARV, but bought at 50% of ARV, but the most I ever got like that was $16k.
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There are many ways to commit fraud and walk away from the table with big bucks.
Re: Cash at Closing? How is this possible? - Posted by GL(ON)
Posted by GL(ON) on April 12, 2004 at 08:59:50:
He is talking about overfinancing. Borrowing more money than the property costs. Lenders used to frown on this and they still do, yet some lenders will lend over 100% of the value of the property if your credit rating is golden.
Usually it means getting a conventional first mortgage, and having the seller take back a whopping second.
It could also mean that they bought a run down property and got a mortgage approved for a large sum - on the condition that the money was spent on improving the property. In this case the lender will only advance part of the money, and will pay out the rest only when the work is done and the property passes inspection.
Probably he is talking about getting the biggest possible first mortgage and having the seller take back a whopping second.
For example Mr. Sheets buys a duplex for $200,000. The bank will lend 80% or $160,000. The seller takes back a mortgage for $90,000. After paying closing costs, there is $47,000 change which goes to the buyer, Mr.Sheets. But now Mr. Sheets owes $250,000 on a $200,000 property. And he has to make the mortgage payments too.
You have to buy awfully cheap to have enough rent coming in to cover payments like that.
This was a favorite technique of the real estate gurus in the 70’s and 80’s.
Re: Cash at Closing? How is this possible? - Posted by phil fernandz
Posted by phil fernandz on April 12, 2004 at 08:12:04:
Or the guy could have bought low and refinanced money out of the deal. Hence, a check for $47,000.
Re: Cash at Closing? How is this possible? - Posted by michaela-ATL
Posted by michaela-ATL on April 12, 2004 at 07:20:13:
Steve,
while the average flip may bring 4-10k, there could certainly be deals, that could get you higher amounts. It all depends on the deal.
ALso, a check like that could come about by someone buying a property with 30k cash and flipping to for 47k to someone else…
Michaela
Re: Cash at Closing? How is this possible? - Posted by dave
Posted by dave on April 12, 2004 at 16:21:37:
those were the days! unfortunately they’re over. there isn’t a lender on the planet who will make such a loan today.
seasoning issues
no c/o
non owner occ.
the only way you could do it is to use a hard money lender and i don’t know any who will let a buyer walk out of closing with $40k.
Re: Cash at Closing? How is this possible? - Posted by Tommy T
Posted by Tommy T on April 13, 2004 at 24:05:12:
That Carlton, what a cut-up he is! That kind of deal doesn’t work
where any of us live, or does it… unless there are motivated
sellers, but…
OK, seriously, kids, here’s a common way to do this deal: Back in
the old days, Robert Allen called this technique a Second
Mortgage Crank. Requires a motivated seller and a fixer
property. Say it will be worth $100K fixed up, needs $20K work.
Seller wants $60K, does not want the property and can’t sell it
because it needs work.
You negotiate to give the seller $20K at close and a $40K note,
subordinated to the new 1st, due in 12mo. or when you sell the
property, whichever is sooner. You borrow $60K from hard
money lender or private party.
At close, $20K goes to seller, $20K to your fix-up fund, $20K in
your pocket. For sake of keeping it simple, closing costs are not
calculated in this example.
Now you owe $60K on the new first note, and still owe $40K
second to seller, for a total owing of $100K, the ARV. You have
$20K in reserve to do repairs, and $20K cash.
Can you go out tomorrow and find one of these deals? Maybe not
tomorrow, but soooner or later, and only if you are looking in the
right places. Hint: Your realtor doesn’t have any of these. Good
place to look: Probate properties.
Notes: Be sure of all your numbers going in; Don’t actually
borrow 100% of ARV; Don’t spend your $20K cash until property
is sold, just in case Murphy’s Law is still enforced in your area;
Have an exit strategy…how are you going to have this sold and
closed, or refinanced, in time to pay off your lenders?
Plan B: If you are in an area where a lot of investors with too
much money are paying way too much for fixers, learn how to
find these before they do, get an option, and market the property
to those investors. A lot simpler and faster way to get those
checks, especially if you don’t have time, money, credit, or fixup
skills!
Can these really be done? Will a seller accept these terms? Yes,
and yes! We have done many of these. Be persistant, it’s a
numbers game.
Cheers, happy hunting!