Is This a Good Opportunity? - Posted by Jim LaVerdi

Posted by Jim Pasquini on January 16, 2000 at 11:48:57:

Chalk it up to a typo, unless $1900 includes T&I and $1800 plus T&I puts it over that. Gatten don’t do negative cash flow. He’s a money making fool. :slight_smile:

Is This a Good Opportunity? - Posted by Jim LaVerdi

Posted by Jim LaVerdi on January 14, 2000 at 19:52:39:

Seller calls me! Says they have a house 3100 square feet PITI of $1,900.00 asking $223,000. They have only owned the home 7 months so no equity. Can I take it subject to and then Lease Option it out? The sellers just want out of this house! What would you guys do and do you think this is a good initial deal for a new investor?

I would be certain to include a contingency for me to locate a tenant before the deal happens.

Any Thoughts appreciated

Thanks, Jim LaVerdi

Re: Yoooo bet it is! that’s what I do! - Posted by Bill Gatten

Posted by Bill Gatten on January 15, 2000 at 16:56:28:


Without any more knowledge than you have given, let me offer this (what I would do).

First take an option for, say, 45 to 60 days (or longer)…for, say, $100.00 (to acquire the property via a PACTrust).

Then advertise (“No Bank Qual, No Down, as little as 3 payments and Closing Costs moves you in. Beautiful $230,000, 3,100 sq. ft home, only $1,800 per mo. plus tx and ins.”)

When they call you say: "Yes, well, I have an option to pick up this great little property over there on Elm Street: and I’m looking for someone who can afford the payments and the up front costs to pretty much just give it to. (Pause…) The only thing I want out of it is to have you agree to sell it, or refinance it in your own name in a few years…and at that time, if there’s been any appreciation, I’d like to split it with you.

Now… when you find a taker you feel good about, have them sign a purchase offer with a deposit; exercise your option; put the property into a land trust in the owner’s name; take an assignment of beneficiary interest in the trust (90:10 with a forfeiture of the 10% at the trust’s termination)…along with a Limited Power of Attorney to direct the trust. You then lease the property from the trust, thereupon subleasing it to your qualified taker (resident). You then make the resident a 3rd beneficiary in the trust (with a 50% beneficiary interest: i.e., he has 50%, you have 40% with another 10% coming at termination).

By giving the resident beneficiary all the tax write and all the incidents and benefits of homeownership, he’ll have no trouble agreeing to make all the payments, and handling 100% of all the costs of ownership.

You now own income property with no down, no new loan, no bank qualifying, no payments, no management, no negative CF and no costs of upkeep and repairs…and no actual risk (financial or credit-wise): whatever your costs are, your 3rd beneficiary pays you more; whatever you monthly payments are, your 3rd beneficiary pays you more. You profit centers are; money up front, money at the trust termination, cash along the way, and whatever equity your can create between your acquisition value and the mutually agreed upon value at inception that you and your resident beneficiary agree upon.

Benefits: Virtually no risk of DOS violation (or detection): transfer is silent, secret and anonymous; virtually no risk of creditor or tax liens of any party affecting or attaching to the property or to the other party; no title transfer by the seller (beyond its own living trust); eviction greatly simplified in the event of default; cash received (enhanced cash-flow) in exchange for income tax benefits. This is (can be) true armchair, auto pilot real estate investing.

NOTE: For investor with plenty of credit and cash, you can look for properties with equity in them to use the same concept?but for someone trying to get their fingernail under the lid, or willing to bet on appreciation?.this system is really great for picking up properties with nothing out of pocket and minimal hassle.

Bill Gatten

Re: Is This a Good Opportunity? - Posted by John P S.FL

Posted by John P S.FL on January 15, 2000 at 15:12:57:

Jim, are you ready to make a $1900.00 dollar a month Mortgage payment if you do a " Subject to". You need to find out more info like Trandle said. You need to find out what they owe, what the house is worth etc etc… I am also a new investor and I will try to do a deal in this price range but I am carefull. I can’t handle that type of payment currently. You could try a L/O with them but you need to see what the current rents are in the area and what the other houses are selling for to see if you are getting enough of a discount. You might want to try a straight option on them, I am currently trying my first with a seller who wants out, but does not want to L/O to me.Before you do anything you need more info.

Good Luck

John P.

Re: Is This a Good Opportunity? - Posted by TRandle

Posted by TRandle on January 14, 2000 at 20:48:56:

What do they owe? What’s it worth? Is it vacant or will you have to make appointments with them to show it? I assume they still live there. Are they going to stay until the tenant is ready to move in? What’s the interest rate (payment seems a tad high for that amount, of course, that’s based on my experience here)? What’s a comparable rent for a house that size? What are your exit strategies? Just some food for thought…

Re: Yoooo bet it is! that’s what I do! - Posted by Bassman

Posted by Bassman on January 15, 2000 at 20:43:31:

Hi Bill,
Im a little confused here.
You say that you would lease it to the 3rd party for $1800 plus tax and ins , and that you would make that a profit center along the way.
My confusion is… if the pmts on the house are $1900 , are your really going to be making any money on the cashflow? Or was it a typo and you meant to say , lease it to the 3rd party for $1900 plus tax and ins, thereby making some cashflow?
Hope you can clear my confusion, thanks.
Scott Cooper

Re: Yoooo bet it is! that’s what I do! - Posted by Bill Gatten

Posted by Bill Gatten on January 16, 2000 at 12:43:48:

Hi Scott,

Not a typo.

The PITI was said to be $1900; I want $200 positive cash flow. Therefore, the final aggregate amount will be $2,100. I advertise a figure that is inclusive of: the P&I, plus my positive cash flow and any trustee fee (say $50). (I.e., PI is $1,550 + CF $200 + TF $50 = $1,800). Then in addition to that, they’ll of course have to pay the Property Tax and Insurance. Thus, the payment is: “$1,800 plus tax and insurance.” Invites more calls than advertising $2,100 to most folks, and its not deceptive to anyone with enough brain power to understand that tax and insurance are always separate from the mortgage payment and other assessments.

I could have said: “Total payment is only $1,550, plus $550 worth of all the other garbage that goes into making up an aggregate monthly payment.” …But I chose not to.

Best Regards. ?Looking forward to meeting you in Atlanta.

Bill Gatten

P.S., And thanks, Jim, for the compliment…?see you at our PACTrust workshop on 1/29.