Re: You’re not getting it - Posted by LeasePurchase
Posted by LeasePurchase on March 29, 2005 at 23:09:49:
I’ve had forty two other people who have emailed me personally and they seem to get it just fine.
It sounds to me like the old adage is true, “you can’t teach an old dog new tricks”. But here it goes again. I’ll speak slower this time.
I take the property Subject To by having the owner/seller place the property into their own Land Trust naming me “a” beneficiary.
I then make a cash contribution (my own $) to the Trust for the amount needed. My equitable interest in the Trust is equal to the amount I contributed plus any profit we agree on.
Once the note is brought current or the note paid, I will purchase the property from the Trust, in my name, with my own financing. When I do so the owners underlying note is paid and my contribution is silently paid back to me plus my profit. If I were to just go out and purchase it from the outset I would not be able to pull cash out. By purchasing the property from the Trust I can.
I then place the property into MY own Trust and name the original owner a beneficiary. I then lease the property to the original owner on a Net Basis from my Trust until such time as they can refinance the property back into their own name. I enjoy some cash flow along the way and half of the equitable growth over the current Fair Market Value.
Even though I obtain financing in my name, I am not responsible for the mortgage, maintenance, upkeep or repairs because of the Triple Net Lease. Because it is a Net, Net, Net Lease, my lender gives me a 100% Rent-To-Income credit which allows me an unlimited number of mortgages financed in my name. If you think about it, the more mortgages in my name the less risk I have. If all hell breaks loose and I’m stuck with many properties I can’t rent or make payments on I will just let them go back to the bank. For crud sakes, it only took me 3 years to get 246 properties anyway. I can do it again.
I was told it couldn’t be done. Well, like the song says, “Look At Me Now”.
Re: You’re not getting it - Posted by Dick Chelten
Posted by Dick Chelten on March 30, 2005 at 14:53:38:
Seems to me that the whole issue here isn’t that you are putting the home in a trust, but rather that your mortgage company credits your tenants’ triple net lease as 100% vs taking 25% out for the standard deduction we all are used to.
I have been doing rent to own programs for buyers who pick out their chosen home from the MLS, I buy the hme and then lease it to them on a triple net lease basis. They are also provided a separate option agreement (that the mortgage company never sees).
I haven’t had one mortgage company give me 100% credit. Not WAMU, not Chevy Chase, not Country wide, not Greenpoint.
Who are you using for mortgage lending? What LTV’s and interst rates are you getting?
If you’re in St. Louis, I’d love to buy you a drink and pick your brain. 200 deals! You da man!
I guess I’d like to see the docs that says that YOU are not personally LIABLE for the repayment of the TD/Mtg. You are clearly saying that there is NO personal guarantee on your part…? That is what I hear you saying…
This is no different than a Corp borrowing in the Corp’s name… which is done all the time, but RARELY without the Officer of the Corp providing a Personal Guarantee of the indebtedness. This is just something that doesn’t happen for small closely held Corp’s, Trusts, LLC’s, etc., in the 2005 banking world.
Straighten me out here… Am I misunderstanding something or what…? The fact that there is a Triple Net Lease surely doesn’t mean that you have NO personal liability of these loans here… If so, I want to see this… Call me Thomas… Doubting Thomas.
Re: I’d like to see the Mtg/TD docs - Posted by LeasePurchase
Posted by LeasePurchase on March 30, 2005 at 22:38:24:
Sorry for the misunderstanding. I didn’t mean that I am not held personally liable for the TD/Mtg. Ultimately I am of course. I’m not sure how to express it but I will try. It seems to me that in order to give me a 100% RTI that my Lender needs to treat it as though I have no liability, at least during the term of the lease. Now I know there is always a chance that I could be stuck with a property that I will have to make the payments on until I locate a new Resident on a Net Basis, but that is very rare for me. In fact, I have only had to replace one in the last 3 years. I collect quite a large deposit of 5% to 10% that is only completely refundable when and if they successfully refinance into their name within our agreed time frame, usually 3 to 5 years.
I also don’t establish a pre-determined purchase price. The Resident will purchase the property at the appraised value at the time they are ready and able to buy, minus their initial contribution to my trust and half of the equitable growth.
I just did another one with Greenpoint today. Someone else said that Greenpoint wouldn’t give 100%. The Acccount Executive for them just left my office with my new loan docs that included my RTI Letter. I’ve done them with Countrywide too.
You say, “I also don’t establish a pre-determined purchase price. The Resident will purchase the property at the appraised value at the time they are ready and able to buy, minus their initial contribution to my trust and half of the equitable growth.”
How do you protect yourself in a down market? Example: You have $100,000 into deal and 2 years later it appraises for $90,000. According to what you said they would purchase it for $90,000. Where is your protection?
That explanation helps some… So you are saying that Greenpoint, Countrywide, et al Lenders have accepted the income from the 3-Net lease as the income stream to service the debt. So from a qualifying standpoint, what type of personal or business financials do they require you to submit for underwriting of such a Mtg/TD loan…?
I do deal with some lenders that when they evaluate an income stream from a Lease or Lease Option, they require 10% greater in cashflow, than the PITI, and then they will accept only the income stream from the rental, without the use of any other formulas for qualification… This is a commercial type loan, that is not exactly a Fannie/Freddie type loan, and I suspect that the Loans you are obtaining are not either.
Just interested in understanding more of the exact specifics here, so that if this seems feasible in some of my deals, this may be applicable. Appreciate the input and elaboration. Thanks.
I’ve got more than my share…