performance mortgage questions - Posted by Kate (NC)

Real Estate Investing
1

Posted by Michael Morrongiello on September 04, 2009 at 24:53:38:

Kate:
Why not go about this a different way… if they cannot refinance to buy you why don’t you SELL them (the other partners in the LLC), YOUR interest in the property or LLC and also FINANCE it be securing it with a mortgage against the ENTIRE property.

This could even be a wrap around type lien as well.

Now they will be responsible for PAYING You on your Note resulting from the sale and at some future point you may be able to simply SELL off your Note to convert it into a lump cash sum.

EG.

The LLC owns a property worth $200K and $100K of debt is still owed against it- Thus $100K of equity exists.

There are 3 “partners” in the LLC and each has an undivided 33% percent interest. Thus your equity is approximately $33,000 (33% of the $100K equity).

Your agree to SELL your 33% interset in the LLC to the other (2) two partners (who hold 66%).

So you sell to them and also FINANCE the sale of your 33% interest by taking back a $133,000.00 WRAP AROUND Mortgage (or Trust Deed) and a WRAP AROUND NOTE.

The $133K Wrap Note encompasses the existing $100K existing mortgage debt. They wil pay you and you will continue to pay on the existing $100K debt. They are effectively buying out your 33% pwnership interest in the LLC and property.

Down the road a few months from now, YOU may be able to SELL off your $133,000.00 Wrap Around Note and Mortgage for a CASH lump sum. From these proceeds the existing $100K lien will be paid off and you will receive any overage.

Again this is just a different way of being able to transact the sale of your interest.

Hope it makes sense.

Michael Morrongiello

2

performance mortgage questions - Posted by Kate (NC)

Posted by Kate (NC) on August 31, 2009 at 11:13:27:

I am a guarantor, along with a business partner, on a note secured by property we own in an LLC. I am being bought out of the partnership by my current partners, however, they are unable or unwilling to refinance the loan or otherwise have me released as a guarantor. The loan will be called in 3 years.

How can I use a performance mortgage to protect myself in the event that they default through non-payment or failure to refinance the loan? Is there another instrument that may be better? I may end up with a 2nd on the property in exchange for remaining on the loan, so maybe that can be worded such that I can foreclose on that 2nd if they are in default on the 1st.

There will likely be substantial equity in the property in 3 years (it’s already at 60% LTV), so curing a default on the 1st and owning the property myself is probably a money-making proposition.

Thanks for any insight.

Kate