Posted by JPiper on December 16, 2000 at 10:25:22:
Matt:
In this situation evidently there is existing financing. The idea would be to take title subject to that financing (that is, you take over the loan informally and make the payments on it).
The problem with this is that this action will trigger the due on sale clause that probably exists in the note and security instrument. In order to avoid this one method is to have the seller deed the property into a trust…then assign the beneficial interest in the trust over to you. This still triggers the DOS clause, but the action is out of the sight of the lender.
You would probably want to have a different trust for each one of these that you did. The good news is that you don’t need an attorney to write each one up…instead you can buy Bill Bronchick’s land trust course which will tell you how to do it and provide the forms to do it with. The cost would be much less than the cost of an attorney AND it’s a one time expense.
I don’t put EVERY deal into a land trust. But I do put alot of them into one…the ones where I have due on sale concerns and many of the ones that I hold. If I’m doing a flip or rehab many times I don’t.
New investor tips? Read the newsgroup and all the how to articles. You’ll find more tips than you ever dreamed of.
Posted by JayHoward on December 13, 2000 at 11:01:25:
A good friend of mine has a rental prop I can pick up from him for 10-15,000. The rentals in the area where it’s located are no less than 350. He doesn’t want to mess with it so he said he would make it real easy for me to get it. He had a partner that flaked out on him so he said he would make me a great deal just to irritate this guy. So what’s the best way for me to acquire this prop for as little out of pocket as possible? The mortgage is around 13,000 now and it’s through a standard mtg co financed for 15 years (although my friend has been paying around 500 a month on it just to pay if off faster). We’re in OK, and I’m relatively new at RE. All suggestion will be greatly appreciated.
Jay
Posted by JohnBoy on December 13, 2000 at 14:00:31:
Another thing. You mentioned he had a partner that flaked out and he would make you a great deal just to irritate the guy. Make sure you check title to make sure your friend is the only one on it and that he can sell you the property without needing his partner to sign off on anything. If his partner has to sign anything in order to give you clear title then your friends plan to irritate his partner could back fire on him.
Posted by JPiper on December 13, 2000 at 13:19:46:
I?ve done well with these cheap rentals??although I generally would rather lease/option them than rent them.
But understand something: Chances are this rental will not be a bed of roses. Without knowing your area my guess would be that this is an older house in an area that is somewhat questionable. This brings up a variety of questions. One question is what type of condition the property is in. If it is in fact an older house, then chances are it either needs repair or will need repair. Repairs in a cheap rental aren?t any cheaper?.that is, for example, the furnace and installation will cost just as much regardless of the house. In fact, in an older house you may need to install new duct work with the furnace?driving your cost up. And at cheap rental rates it takes that much longer to recover the cost of this expenditure.
Houses in borderline areas attract tenants who are borderline in many cases. This type of tenant is probably not going to be a white collar type worker. More likely, he is a blue collar worker who is subject to being hurt on the job, or losing his job, or seasonal type jobs etc. That old car they own may break down, forcing a decision as to whether they fix the car or pay the rent. The point is that these tenants require a hands-on approach. Your friend doesn?t just ?not want to mess with it?. Chances are he?s worn out!
Having said this I like low-end rentals. There?s a lot of bang for the bucks. But I would also say it?s not for everyone. You should take a good hard look inside, and a good hard look at the area to make sure you?re up to the challenges that you will undoubtedly face. Also make sure you do a careful inspection of the property.
If you decide to proceed, take the loan over subject to in a trust.
Jpiper,
I have a question in this situation. You say take over the property subject to, but in this situation subject to what? I am a new investor and just am curious about exact wording on these subject to deals. Also, do you need a lawyer to set up those trusts everyone on the site talks about and do you need to do a new one for every house that you flip, retail, etc.?
I have been reading this board for about 2 months now and already feel I have learned a great deal of knownedge about REI, and I am turning to you beacause you seem to have some of the best responses I’ve seen to anyone’s questions. Hope some day I can be on your end helping out newbies like me!!! Thanks in advance for any help you can provide.
Matt-OH
P.S. Any new investor tips you can offer???