HELP on L/O with low equity home - Posted by Anna-WA

Posted by Bassman on June 04, 1999 at 18:42:46:

The only stupid newbie question is the one that wasnt asked.
The deed is the prize ( next to the cash) in doing deals . The deed is what shows ownership. He who has the deed owns the property, therefore when I say " go for the deed " it means go the quick and easy way into a deal.Once you have the deed , you possess/ control the house , making things a lot simpler.
Hope this helps.

HELP on L/O with low equity home - Posted by Anna-WA

Posted by Anna-WA on June 04, 1999 at 15:56:23:

Looking for feedback.
Desparate seller- moved out of state and now 2 months behind on loans. House appraises at 130,000. he owes 118,000. I told him he did not have enough equity in the house so my offer was below what he owes. I then suggested a L/O. I asked if he would be interested if i could find a tenant/buyer for a 12 month L/O. I also suggested that if I could find a tenant/buyer for him, we could split any down payment received. I only plan to help by showing the house for the out of state owner. All paperwork will be done by him. Is this activity considered brokering?

FEEEDBBAACCCK please. I don’t want to get into hot water before starting in the biz…

Sounds like a good candidate for a PACTrust . . . - Posted by Brad Crouch

Posted by Brad Crouch on June 04, 1999 at 22:41:41:


if the seller is willing to keep his name on the underlying loan for a few years.

Help the seller put the property into a trust, in his own name (as the benificiary). Then advertise for a “buyer”:

As little as closing costs and 2 advance payments
can move you in. $130,000 property only $XXX.XX monthly plus tax & ins. Incredible trust opportunity.

“NO BANK QUALIFYING” doesn’t mean the buyer won’t be “qualified” . . . only that a bank won’t be doing it. You would be doing it, and you shouldn’t let anybody in there unless you feel comfortable with them, and their ability to pay.

And if their credit is less than “stellar”, you might want more than 2 advance payments. That’s up to you.

The seller assigns 50% of the beneficial interest in the trust to the new “resident”, making him a “resident beneficiary”. The seller also assigns 40% of the benificial interest in the trust to you, the investor.

The new “buyer” leases the property (triple net lease) from the trust for 2 years, 11 months and 29 days. Any time this “lessee” stays longer than the lease period, he is a “holdover tenant” and this status can be maintained for as long as the other beneficiaries allow it. This allows the trust to exist longer than the lease period, without triggering the loan being called “due”.

The buyer comes in with an amount called “closing costs”, but since no closing actually takes place until the property is eventually sold, the money goes into your pocket (like initial option consideration). You may want to agree to split this upfront money with the seller as you mentioned . . . or you could structure the deal so that the seller gets some monthly cash flow, along with you. Or it might be better to give the seller nothing now, but instead let him collect whatever monies he is due when the trust terminates.

The PACTrust is pretty flexible, and you can do it whichever way you want, and can get agreement on.

When the trust terminates, the property is sold for FMV with the resident benificiary getting first dibbs. But the trustee is obligated to sell the property at FMV, regardless of who buys.

Also, when the trust terminates, the seller forfeits his 10% benificial interest in the trust to you, the investor, as consideration for timely payments to the lender, etc… This gives you a 50:50 interest with the resident benificary so you can “split” the net proceeds of the sale, when it occurrs.

The principal reduction that has taken place during the time the trust was in effect, and the appreciation that may have occurred, is yours to split with the resident benificary after the underlying loan has been paid off and the original seller gets whatever he has coming and the cost of the sale has been taken care of.

Oh yeah, the resident beneficiary also gets back all “non-recurring” costs that he has coming (this means the initial “closing costs” and any “approved” improvements that may have been made).

So . . . similar to a lease option, you can get “upfront cash”, a monthly cash flow and a “back end” spread that can be pretty substantial.

There are, of course, more details about this . . . you know, the things that make this method a pretty good “legal sheild” and go the protection of all parties from each other as well as bankruptcies, marital problems, liens & judgements, etc… For more details on this method of property aquisition and disposition, I wouls suggest clicking on the Cal-Equity banner at the top of the main newsgroup page.

Good luck,


Re: HELP on L/O with low equity home - Posted by Richard M. Roop

Posted by Richard M. Roop on June 04, 1999 at 17:06:03:

“Thanks for the input, is there a way i can do a lease option which will allow me an out if i can’t find a tenant buyer straightaway? Would i simply add a subject to inspection which is acceptable clause?”

Yes, put in your lease option that your agreement begins when your subtenant moves in. Since you are not obligated, give your seller an out also.

Put in the agreement that if he wishes to cancel the agreement, he must inform you in writing. You must then respond within 3 days that your contingency (to get a tenant/buyer) is voided or you are committed to beginning by a certain date, say 14-21 days later.

Or something like that.

  • Richard Roop
  • Woodland Park, Colorado
  • Full-time Real Esate Entrepreneur

Re: HELP on L/O with low equity home - Posted by Bassman

Posted by Bassman on June 04, 1999 at 16:56:42:

If the seller is as motivated as you say , why noy try the following :
Get the deed , subject to the existing loan .
Make up the back payments .
Put it in a trust ( of course).
Sell either to a qualified buyer outright or sell on a l/o .
If house is FMV of 130k sell on l/o for 140k , 7k as
nonrefundable option .
Or sell as owner finance 140k 10k dwn a second for 13k
@ 12% for 20yrs with 5 yr balloon .
Or a wrap for 140k , 10k dwn 130k @ 20yrs 10yr balloon . Then sell note if you dont want the income stream.
Lots of ways to do a so called "low/No equity " deal.
Just ask for the deed first, you’ll be surprised at how many people will give you the house to solve their problem.
By the way , if you get an “option” on the house you can get around the broker problem because you will have an interest in the house .
Just my thoughts.

Re: HELP on L/O with low equity home - Posted by Richard M. Roop

Posted by Richard M. Roop on June 04, 1999 at 16:53:37:

Sounds like you are representing the owner…which is brokering.

You want to lease the house with and option then sublet it out to your buyer. I suspect you can find a buyer to pay $138,500 with 3% down. Offer $100-$200 a month rent credit.

Sounds like a potential deal as long as your lease payment (just enough to cover owner’s monthly costs) is reasonable and the house is in good shape.

  • Richard Roop
  • Woodland Park, Colorado
  • Full-time Real Estate Entrepreneur

Re: HELP on L/O with low equity home - Posted by Tim

Posted by Tim on June 04, 1999 at 16:03:50:

I am a newbie, but it sounds like you may be acting as an agent/broker. In order for your to make any money, you will need to have an ownership interest
in the property such as having a contract in place. Be careful and get someone’s opinion who knows so you don’t run afoul of the law and possibly open yourself up to seriorus liability.


Deed? - Posted by Brian (CA)

Posted by Brian (CA) on June 04, 1999 at 18:20:39:

I’m sorry if this is a stupid newbie question…

In this response and in several other messages, I’ve heard about “getting the deed”. What exactly does this accomplish? What is the purpose of the deed and what is it used for?

Re: Deed? - Posted by Bud Branstetter

Posted by Bud Branstetter on June 05, 1999 at 08:45:46:

When you sell a property using a L/O the typical down you can expect is in the 3-5% range. When you sell with owner financing you can expect 5-10% as down payment. Yes, the figures vary, but generally you can get more cash upfront with owner financing. Generally you have to have the deed to provide owner financing.