Posted by randyOH on September 07, 2002 at 13:40:31:
Okay, good luck. Let us know how it goes.
This cash-back-at-closing thing when buying - Posted by Kristine-CA
Posted by Kristine-CA on September 06, 2002 at 10:42:02:
I was recently out farming my area for vacant properties, and, as it is out-of-town, I spent the night in a motel. I don’t have television at home, so I finally saw my very first rei infomercial–Carelton Sheets. I was hoping for John Beck, but I couldn’t stay up all night looking for infomercials. Anyway, what is this cash-back-at-closing business?
The archives are down so I can’t check there. But I can only guess that it has something to do with financing the property in such a way when buying that somehow you are purchasing for less than what you are borrowing? It does involve borrowed funds, right?
It sounds so suspicious, but someone on this board recently mentioned just closing a deal like this recently.
How bad is it? Are there any pitfalls? What is it?
Thanks for your thoughts. Sincerely, Kristine
Re: This cash-back-at-closing thing when buying - Posted by Lyal
Posted by Lyal on September 07, 2002 at 07:10:49:
Kristine,
Just as an example. This past week I closed on a small deal for a mobile home on it’s own lot. The sellers just wanted OUT so I gave them their asking price of 15K. I deal with a small, local bank that will lend 80% of the appraisal value. The appraisal came back at 37.5K so I asked if I could borrow 18K against it (my banker knew I was only paying 15K). Her answer was that it was a “no-brainer”. After closing costs I walked out of my attorney’s office with a check for $2100.00 and change. Prior to closing I had NO MONEY out of pocket.
After I fix up the home a little (with the left over money), I hope to sell just the home for a about what I paid for the whole deal and rent the land.
These deals don’t happen every day but if you’re out in the market, you’ll find them.
All the best, Lyal
Re: This cash-back-at-closing thing when buying - Posted by Al Nagy
Posted by Al Nagy on September 07, 2002 at 24:56:44:
Hi Kristine,
I have taken the CS course. It was my intro to REI earlier this year.
I do not know when seasoning became an issue; this is my first year of CREI. One of his strategies is to immediately refi, which shows that, at least in this area, his info is outdated.
In your offer you could ask for an allowance (carpet allowance, decorator’s allowance, etc.) at closing. That is one way I know of getting cash back.
I suppose you might offer closer to asking price using that method. (Asking: $75K; counter $70K with an allowance to buyer of $3K at close.) Very simplified example, then again I have only done 2 deals.
HTH
Lotsa Luck!!!
Al Nagy
Re: This cash-back-at-closing thing when buying - Posted by D
Posted by D on September 07, 2002 at 24:27:56:
Almost every deal I have done was with none of my own money down and got cash at closing. Mr. Kaiser as usual is right on the money. Ive never bought a course but Im told Sheets advocates having rentals,I kept a couple for rentals only because Im going to rezone but thats another story. In my opinion, why rent? You have taxes, insurance, renters whos mission in life is to make you not sleep and my all time favorite; The overflowing septic tank. Ive had rentals. I sell on a wrap at 10%. My thinking is all of my profit is automatically earning interest. Dont be suspicious, its just another trick for your bag of tricks. Ive been able to do very well with these deals. D
Don’t feel bad about the infomercial. - Posted by $Cash$ (NV)
Posted by $Cash$ (NV) on September 06, 2002 at 12:49:42:
Kristine,
My pleasure to talk again.
I am still trying to figure out which one of those little fellows in the infomercial is Carleton Sheets.
If you get into town and see the informercial again please e-mail which one it is, maybe it is just my black and white television acting up, heck of a way to go through life seeing everything in black or white.
Or maybe that is the way we know who is telling the truth on them thar infomercials I mean if it is shown in black and white it must be true?
$Cash$
Re: This cash-back-at-closing thing when buying - Posted by BrokerScott(Mich)
Posted by BrokerScott(Mich) on September 06, 2002 at 11:13:44:
I presume that you aren’t talking about just flipping a propety to another investor and pocketing a couple of grand. One way for example is to buy a junker on a L/O fix it up, and refinance it. This would involve a double closing as you would need the option holder out of the way. For example: You locate a real POS (a very technical investment term…lol) and take an option to purchase within 18 mos for $50,000. You put some work into it, get it rented out and make whatever payments the option agreement calls for. The property after improvments is now worth $80K. I usually hold a property for a year before re-fing, to avoid seasoning issues, but there are some financiers (less and less all the time)that don’t care about seasoning. But back to the point- you take out a 80% LTV cashout mortgage which is in the amount of $64,000 (80%of $80,000) You pay off the option and pocket the $14,000 differance less expenses. The obvious pitfall is that the seller would try to claim fraud (not- since you did the work to bring the property up to its value. KEEP YOUR RECIEPTS!) and hold up the closing. Personally I prefer to own the property fee simple before i take cash back out, but that’s just me. No comments from the peanut gallery guys. Of course there are many ways to accomplish cash back. This was just a simple example. Scott PS You never saw Carlton Sheets before? I remember him on the airwaves back in '84.
Re: Don’t feel bad about the infomercial. - Posted by Kristine-CA
Posted by Kristine-CA on September 06, 2002 at 13:18:35:
Cash: I’m not sure, but I think Carleton Sheets was the slightly bigger guy who constantly interjected the interviewer’s name into everything he said. But it would be hard to say, because I think that slightly bigger guy (the one with the soothing airline-pilot drawl) was also praising Carleton Sheets and gave him all the credit for changing his life. But lots of people refer to themselves in the third person, right?
I wouldn’t send them any money because I do not want to live in a mansion with a pool and that seemed to be the only result they were offering. Now, if they had interviewed someone who was thrilled because they had built some low-income housing or were living in a little shack in the woods enjoying their free time and their family, well, then it’s hard to say how much I would have been able to resist that marketing.
I am so curious about what is in that course that makes so many people buy it. But I’ve seen enough courses to know that it might be long on motivation (you need and deserve these riches) and very short on details. Maybe I’ll find one at a garage sale someday.
I’ll write again if I figure out who is who in those ads.
Sincerely, Kristine
Say what? - Posted by js-Indianapolis
Posted by js-Indianapolis on September 06, 2002 at 17:12:40:
You said “The obvious pitfall is that the seller would try to claim fraud (not- since you did the work to bring the property up to its value. KEEP YOUR RECIEPTS!)”
I don’t see any fraud at all. You sign a l/o, and you exercise your option. What’s the problem?
Re: This cash-back-at-closing thing when buying - Posted by JoeKaiser
Posted by JoeKaiser on September 06, 2002 at 12:08:39:
I wrote this awhile back for something else, but it fits here, I think.
Cash at closing - Just More Seminar Buzz
How many infomercial course do you think get sold as a result of pitching this technique? Answer . . . plenty!
Getting worked up about some secret technique that puts cash in your pocket when you buy properties is just plain dumb. Well duh . . . Guess what? Real estate agents have figured out how to get paid at closing so tell me, how difficult can it be? Cash at closing happens all the time when you’re using your brain to buy and sell real estate.
Remember that Lesson about hard money loans? Did you happen to notice we walk out of escrow with cash more often than not? Well now you know how to get cash at closing and I just saved you three easy payments of $49.95. Go find a hot to go seller desperate for cash and understand upfront that anything you negotiate below sixty five percent of value is cash in your pocket. You just sign it up, pop over to that friendly hard money lender, pay the seller out of the sixty five percent and pocket the difference.
Mysterious? Not in the least.
If you’re one of those investors who have decided that for the present time anyway, flipping properties is all you really want to do. Maybe you’re taking my advise and since you understand that it takes money to own rental real estate you’re thinking about doing a year or two of flips before you buy something to keep. Smart. So tell this . . . what percentage of your deal will be cash at closing deals? The answer, obviously, is one hundred percent of them! If flipping properties is your thing, its likely that you’ll have designed and implemented a system which results in you getting paid each and every time a property gets closed.
By the way, did you order the course? If you did, you know that their method for getting cash back at closing has more to do with simultaneous closings. Not a real good thing to be teaching new investors if you ask me. Double closing often require your moon to be in Jupiter on the day closing is scheduled, and if the real estate gods don’t happen to be on your side that particular afternoon, sorry Charlie, you’re flat out of luck. Did I mention that it rarely makes sense to design a game plan that requires an alignment of the planets before you get paid? Yes, I thought so.
Summary
Getting paid at the closing table when you buy isn’t particularly difficult or in any way a well kept secret only available to those will to offer their souls (and a couple of bucks) to the real estate gods currently ruling from on high numbered, late night cable channels. Cash back at closing, for the smart investor, is a virtual given if that what he decides he wants to happen. It is not a requirement more often than not but if desired, can be designed into the game plan as needed.
Joe
Re: Don’t feel bad about the infomercial. - Posted by houserookie
Posted by houserookie on September 06, 2002 at 14:31:33:
I don’t understand the difference between what people say on those infomercials vs. those said on this site about some of the courses offered.
I hope you don’t think that gurus on tv are any worse or better than those on this board. Blaming television gurus for their success makes as much sense as calling computer programmers scammers because none are as big as Bill Gates.
I can tell you what people see in those courses. They see the light. They see another option in life that would not be there otherwise. Some see the light and move forward others see the light and put on sunglasses. Still some see the light and sleep through it.
There will come a point in everyone’s life when you have to tell yourself that you just can’t know it all and somebody out there knows more than you.
Aint no one going to send you free money so it’s better now than next year to start learning.
Pull out that credit card with fraud protection, charge it, and return it if you don’t like it.
Time costs money. Ignorance costs even more money.
Honestly I don’t know how anyone can get scammed with a credit card purchase. I believe the biggest scammer in life is laziness, ignorance and excuses to not do things.
And then there is the possibility that perhaps it’s not the courses or real estate that is the problem.
Maybe real estate is not for you.
Austin
Re: Say what? - Posted by BrokerScott (MIch)
Posted by BrokerScott (MIch) on September 07, 2002 at 04:49:02:
Perhaps I should have emphasised “the seller could TRY TO CLAIM fraud.” The point was that you might and I do mean MIGHT have to file a specific performance suit, if the seller tried to weasel you out of more money. Likely? No. Posible? absolutely. That is why I prefer to purchase fee simple, and take the cash out later. Not very creative, but it works for my situation.
How you get the paid then? - Posted by osirus
Posted by osirus on September 08, 2002 at 03:13:51:
You wrote:
“”““If you did, you know that their method for getting cash back at closing has more to do with simultaneous closings. Not a real good thing to be teaching new investors if you ask me. Double closing often require your moon to be in Jupiter on the day closing is scheduled, and if the real estate gods don’t happen to be on your side that particular afternoon, sorry Charlie, you’re flat out of luck. Did I mention that it rarely makes sense to design a game plan that requires an alignment of the planets before you get paid? Yes, I thought so.””"
I agree with your “alignment of the planets before you get paid” analogy. There are 4 escrow title companies in me area and only one of them verbally agreed to do double closings. When push comes to shove they may reneg.
None the less, I have always been taught that double closing are necessary in the following situations:
- wholesaling REO and purchase contract does not allow for assignments
- any quick flip situation when there is a wide spread between your purchase price and selling price. You want to avoid sour grapes from the seller and buyer so they do not try to cut you out of the deal.
How do you get paid then if you do not double close?
Re: This cash-back-at-closing thing when buying - Posted by Kristine-CA
Posted by Kristine-CA on September 06, 2002 at 13:04:48:
Joe Kaiser: you are right. I have decided that flipping is the thing until I have a lot more cash. And so far, the flips have resulted in 100% cash at closing and it had better remain that way. Having been a renter all my adult life (and is some difficult rental markets like NYC and So. CA), I take the rental business pretty seriously and have no desire to do it until I can do it with cash reserves. Originally I thought I had no interest, but now I know that rentals are a good way to income and assets for me.
Of course I didn’t buy the course! The only things I’ve bought since I’ve been interested in REI is Lonnie Scruggs books and Steve Cook’s course and a few books at the bookstore. Oh, and Roy Stubblefield’s CA tax sale manual. Don’t get me started on that. I am too cheap. And too paranoid about reading too much and doing too little. Already been there and done that with too many other projects.
My question about cash-back-at-closing has to do with buy-and-hold properties. Those that one buys and doesn’t lease/option or re-sell. People are talking about buying their rental real estate and gettting cash back. Somehow liquidating their equity into cash at the time of purchase. But now that I think of it, it’s probably possible to borrow more than needed to pay off the seller. Not sure why I would want to do that though.
Thanks for your thoughts. I re-read your articles from time-to-time, to give myself a reality check about long this process takes. And about how easy it is to get all worked up over rei techniques that just don’t have to be that complicated. I appreciate your ideas immensely.
Sincerely, Kristine
Hey now, … - Posted by Glen SoCal
Posted by Glen SoCal on September 06, 2002 at 17:15:59:
Austin-
I think Kristine was looking for substance over style. The only Carleton Sheets purchase I ever made was at a Thrift store, kind of like a big, organized garage sale. Someone paid good money for that tape set. I got it for $3.99.
Like most investors who have done research, some of the Carleton Sheets info is general, which is fine. There was a lot of good information there.
But to suggest that Kristine is lazy, ignorant, full of excuses, uses blinders to get through life, or is blaming TV gurus for their successes, you have created a situation where I believe, with a high degree of confidence, you are in error.
Maybe you were just making a general reference, not about anyone in particular.
To your success, Glen
I’m fairly confident… - Posted by js-Indianapolis
Posted by js-Indianapolis on September 07, 2002 at 05:26:09:
that Joe Kaiser’s “Best darn document” article (http://www.creonline.com/articles/art-198.html) will cover you 99% of the time. That looks pretty strong to me.
Then again, I have yet to make my first deal. Soon though. Very soon.
I might have one, first deal - Posted by js-Indianapolis
Posted by js-Indianapolis on September 06, 2002 at 17:38:14:
From what I see, time and again on this board, is build up some seerious cash before you go holding. So I found the perfect place to flip.
It’s been vacant for a year, the elderly owner comes to mow the grass once a week. The neighbor tells me the owner rented it until a year ago, and then tried selling it to the renters, but they said she wanted too much. She asked for $70K. It’s a little outdated, but comps in the are are $90-$110K. VERY low taxes too. $276.03 Semi anually. Very desirable area. The only place in this town that has houses near the $100K mark. Top schools in the state. This house is considered “on the wrong side of the tracks”. Dan Quale’s old house is about 2 miles “on the right side of the tracks”. Get the picture? I’m sure I could cram a sign in the front yard, and get $90K, quickly. The house next door (very similar) is on the market for $105K.
So finally, how can I double close? I haven’t talked to the owner yet, don’t want to botch this one. I’ve been calling on other properties (that I probably don’t want) to practice up. I know I can do a L/O, as I’d imagine they would welcome the cashflow, but want to cash out in less than a year. More like, a week.
You think doing a double closing is too much for a newbie? I understand how it works. I would be willing to try it. I’ve been selling since the day I was born. I can talk my way through most anything.
The two things I don’t know is who pays for the inspection, title search, appraisal, etc.
Also, how can I market someone’s house before I take possesion? One, physically getting in. Two, how angry will they be to know that I sold their house for $20K more than they got.
Maybe I should L/O, get someone to gimme $5000 down, sell it for 100K, one year, and wait a year for my profit?
Oh yeah, I’ve got quite a few people that I could assign my contract to for some $$, and just bank $5000. I’m not about to only make $5000 when there’s another $25K to make, possibly.
Re: Hey now, … - Posted by Houserookie
Posted by Houserookie on September 06, 2002 at 19:55:30:
Hi Glen,
Sheets material is not so general to people that have not been exposed to them.
You are correct in that my statement was made as a general reference and not aimed at a specific person. But I can always tell ignorance a mile away.
For someone to suggest that something is a sham without having actually heard, seen, or read the material - that’s ignorance.
Of course then we have have those that read things but can’t put what they read into action.
Carleton Sheets must have had hundreds if not thousands of successful stories from his students. For anyone to suggest that his material is a sham I think it’s just plain silly.
Austin
I already have a simular addendum… - Posted by BrokerScott (MIch)
Posted by BrokerScott (MIch) on September 07, 2002 at 08:16:06:
but that still would not stop a deterimed bozo from botching the closing by tying it up while it is ruled on. Then you would still have to get a specific performance judgement. In the long run yes you would prevail, but not without a major hassle. That was all I was trying to get across, OK?
Re: I might have one, first deal - Posted by Tim Fierro (Tacoma, WA)
Posted by Tim Fierro (Tacoma, WA) on September 07, 2002 at 24:24:50:
Just a word of caution when you talk VERY low taxes, and elderly owner. This owner may be getting a tax break as a senior citizen, hence the low taxes.