It’s a known fact that the Universe adheres to four immutable principles. An acceptance and understanding of these guiding factors makes gods of us all. There is no more knowledge than that embodied in the following four Universal Laws (except, of course, for that Newtonian thing about everything in motion continuing in motion until smacking into an equally dynamic opposing force).
Those immutable laws are:
1. The basal metabolic rate of a sleeping mouse is always slightly higher than that of a dead mouse
2. No sharks are skinned or otherwise harmed in the making of a sharkskin suit
3. All rats kept in laboratory confinement die of Cancer
4. One will virtually never step in anything truly nasty unless barefoot
Bonus: Coloreds must never mix with whites, unless pink BVD’s, Hanes and Jockey Shorts is not a problem
No…hey….just kidding. The real principals follow:
1) PARETO'S PRINCIPLE: The “80-20 Rule”
Vilfredo Pareto was an Italian economist who, in 1906, observed that twenty percent of the Italian people owned eighty percent of their country's accumulated wealth (Not saying much for Italians, but a fact none-the-less…Jim Pasquini will appreciate this one). Over time, and through its application in a variety of environments this analytic finding has come to be called Pareto's Principle, or “the 80-20 Rule”…or “the Vital Few and Trivial Many Rule." Called by whatever name you might ascribe to it, this ratio of 80%-20% reminds us that the relationship between input and output is not equally balanced. Ever! In a management context, for example, this rule of thumb is a useful heuristic (…look it up) that applies when there is a question of effectiveness versus diminishing return on effort, expense and time expended in anticipation of a particular outcome.
A real estate broker friend of mine was once asked: “How many agents do you have working for you now?” Her reply was, “According to Pareto, maybe twenty percent at best.”
To apply Pareto to the rest of the world is to say, for example, that 20% of the people in the workforce do 80% of the work. Of those who preach the Gospel on 20% mean it…the rest are just hoping. Of those who buy tapes and book in our business of creative real estate investing, only 20% put those materials to good use and do a transaction because of them: and only 20% of that 20% do it more than once or twice. The other 80% mean well and “plan to do it.” But the never do.
The lesson to be learned from Pareto? Simple. Just put yourself in the 20% of those who do what they promise themselves they will: it takes a conscious decision to place one’s self in either of the two groups (the 80 percenters or the 20 percenters ), so why not consciously choose the 20% group versus the alternative, and determine to do what you knew you needed to do when you signed up for the course and paid your money in the first place.
2) OCCAM’S PRINCIPLE (OCCAM’S RAZOR): The Principle of Simplifying the Complex by removing (razor-like) Unknowable Uncertainty from Known Certainty
”Occam's Razor” is the term used when the unknown is stripped away from an argument or concept involving certain known and provable likelihoods. This brilliant principle in Logic is attributed to the mediaeval philosopher William of Occam (personally I call him “Willy”…he’s never complained, though perhaps only due to being dead a long time).
Occam's Razor, otherwise known as: “The principal that one should not increase, beyond what is necessary, the number of elements or entities required to explain anything…or they’re stupid.” In other words, one should always choose the simplest explanation of any phenomenon: that being the one that employs the most logic and requires no leaps of faith or unknowable conjecture.
For example: Which do you think is the most logical answer to, say, the “UFO phenomenon?” 1) That these reported sightings might be of space craft piloted by humanoids from another planet from a distant galaxy with no proof or real scientific evidence to back that up; or that instead they might be top-secret experimental aircraft whose developers do not wish them to be seen…or wish to explain if they are seen?
Well, since neither answer is knowable with perfect certainty…Willy O. would choose explanation number two as being the most likely to be the truth and the most reliable one with which to work and plan because we do have evidence and scientific proof that there are in-fact experimental aircraft that are not commonly observed or explained.
The lesson? So often, we want to make the concept of buying real estate via the Equity Holding Trust Transfer™ much more complicated than it really is. Here’s what you learn in a $500 3-day workshop: 1. Find a house and put it in a trust, 2. Find a human or two and put them in the house. That’s it! The documents and details that follow that process are academic and can be worked out by those of us who have nothing better to do.
3) MURPHY'S PRINCIPLE (MURPHY’S LAW): The Law of That’s the Way It Is Anyway
Don’t think of Murphy as a real person, like Pareto and Occam, but if you think about it…who cares? We can’t leave Murphy out of this discussion. Whomever he could, would or might be, or have once been doesn’t matter. His Law is what keeps life interesting. Here are just a few of Murphy’s truisms:
Nothing is ever as easy as it looks
Everything takes longer than you think it will
Anything that can go wrong, will go wrong
If there is a possibility of several things that MIGHT go wrong, the one that will cause the most damage will be the one that will go wrong
Anything dropped accidentally will land on the surface or edge that can be damaged most (e.g., the side that has the jelly on it)
If there is a “worse time” for something to go wrong, that’s when it will
If anything “simply ‘can’t’ go wrong,” it will anyway.
If you perceive that there are four possible ways in which a procedure can go wrong, and are successful by-passing all four of them, a fifth way will promptly develop.
If everything seems to be going well, you have overlooked something.
Nature abhors a vacuum but loves a flaw
It’s impossible to make anything foolproof because of the ingenuity of fools
Whenever you set out to do something, something else must be done first
Every solution breeds a new problem with no solution
Every problem that can be solved already has been
GATTEN’S PRINCIPLE: The Natural Law of the Living Universe
Nowadays homely people frequently don’t act like the know they’re homely, therefore, assuming they have something we want, we are forced to treat them like…well…regular people.
Left to themselves, bad things just get worse…but so do good things, for that matter
Anything not already screwed up, eventually will be, given more than one adjustment knob and a little time
99% of Wet-Paint signs are wrong…unless for those you fail to see
One of any two missing matching items will stay lost only until you dispose of its mate
Anything that is tasty, non fattening, satisfying and well worth the money causes Cancer
He who cares the least in any relationship is in charge of it
Give a man a fish and he’ll eat for day: but give a computer nerd a three-pronged double-hooked bass jig and ample line, and he’ll invariably hook some fellow angler in the ear and have to be rushed to the hospital with a broken nose, once the bleeding fellow angler becomes disengaged.
24.3 per cent of all statistics are either made up or in error: The made-up category leading the erroneous category by a ratio of roughly 2.5 to 1…or so say 5 out of 10 economists polled.
There is no need for anyone to remain in debt, what with borrowed money being so abundant these days
He shortest line at a super market check-out stand is the one you were going to get into before you saw the shorter one that you’re in now.
If you laid the entire population of China end-to-end, head to toe, in a straight line around the world, that should seriously slow down over-population in that country.
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, August 30, 2007
Thursday, August 23, 2007
During a visit with a good friend yesterday I was reminded of something I hadn't thought much about in months, which I'd like to share with you guys. If it affects your life like it did mine, you’ll be glad I took the time.
The friend, a woman of 50 or so, confided in me that she was flat broke, that she'd lot her business, didn't know where this month's rent was coming from...or even this month's food, and that her unemployment benefits had run out. She said she knew she would make it in the real estate investing business…eventually…and just wanted some advice on how to get the ball rolling as quickly as possible.
Well, being the old softie I am, I couldn’t resist telling her to go pound salt, get the hell out of my office, and go bitch to someone else. I had enough problems of my own what with my Mercedes’ transmission dragging on the ground, my Black Lab being pregnant by a sheep, a bad case of prickly heat and a gangrenous left…(oh never mind).
No! No!! Just kidding...I wouldn't do that (…oh ye of little faith…).
Here's what actually transpired:
I told my friend (...for the sake of confidentiality we'll call her "Suzie"...although her real name is Evelyn Fenster) that what she needed to do was stop trying to chop down the trees for a while, and spend some time sharpening her axe. This, of course is not what a person who sees themselves as ‘down-and-out’ and on their last leg wants to hear. What would be much preferred is to hear that there is a guardian angel hovering two feet above who is about to drop a load of fresh manna on them at any minute (BTW did you know that “manna” is the etymological root of “manure”? And, hey, who needs that?).
Well, OK, the guardian angel…it may have been there, but if so it was probably just sitting on a chair smiling understandingly and waiting to see how “Suzie” was going to attack her challenge and thereby get to know herself...and her strengths…and qualify for entry into the next realm whatever and wherever that might be. I’m fairly positive that Heaven is a private Island off the cost of Maui, and that Hell is the “It’s a Small World” attraction at Disney Land (…humming that song in your head now, aren’t you? It won’t stop for days).
Oh yeah, my suggestion to Suzie… Well, it was that for the quickest fix, she might use a technique that was given to me by my son Michael and which I have used very successfully in the past. That is the technique of appointing a Director or “chairman” or “manger of life affairs” to manage the fulfillment of one’s needs and goals.
The essence of the “Director” concept an the acceptance of the idea that in our daily lives we are 100% in control of everything that happens to us (or befalls us). It is therefore ‘we’ who create the situations we find ourselves in, and it is we who gets ourselves out of those predicaments one way or the other.
The various methods we use to get oiurselves out of bad situations include: doing nothing and languishing in a stupor until it blows over; admitting defeat and living on pity and handouts; mugging old ladies; living off the government; knocking over ATM machines; prostitution ('tried that...cut my price twice and still no takers…except for some old guy in a rubber chicken suit who I turned down when I found he was lying about being able to lay golden eggs); robbing a bank or liquor store, or just getting drunk and staying that way.
OR…we can just STOP.
We can relax and let depression take over for a while and let it naturally distort catalogue our problems. The process of depression is the scrambling, distortion and magnification of the various elemental components of our lives. Depression itself, if not actue and pathological, is a natural and often time healthy protection device that we subconsciously call upon in order to better see and finally deal with its causes. Contrary to what most people think, non-clinical depression is a useful device that allows us, if we remain rational through it, to separate our dilemmas and the quandaries from each other.
For a little review, a dilemma is a choice between two bad things (e.g., the frying pan or the fire); a quandary is a state of perplexity in not knowing what to do next. The former is unsolvable and should be tossed into your mental trash can…it’ll either go away by itself, work itself out, or kill you, no matter what you do. A true dilemma doesn’t need, and cannot use, your help or energy. The latter—the quandary: now that’s the good one. A quandary is always solvable by simply eliminating indecision and procrastination. The problem with quandaries though is that they are comprised of hundreds of tiny microscopic components that we’d never be able to see if we opted to take a pill or a bottle of booze in order to hide or run away from our natural “depression reflex.”
What are the myriad components of depression? They are all the random solutions your “internal staff” is coming up with…all at the same time: they are manifested in a cacophony of interlaced and confusing demands, laments, bright ideas, test solutions and a bunch of begging and mewling that simply cannot be sorted and processed by one brain.
Your male side wants one thing; your female side wants another; your child-self wants something else; your adult-self wants the opposite; your parent-self has a completely different need. In depression your Fear is demanding retreat while your impetuous and curious personality is afraid to make a decision as to whether to stand and figt or move on. The fact is that all of these disparate inputs are blocking and neutralizing each other; thereby short-circuiting any possibility for logical mental processes, mush less resolution and forcing the sufferer to lapse into worry and despair. Unlike the dilemma, the answer to the quandary is always there, but neutralized by all the other random inputs.
The solution? First of all, one must come to grips with the fact that your own life is no more than a movie script that you are both writing and acting in. You wrote it, you are directing it and you are playing all the parts. You are the camera crew; you are the makeup man/woman; you are the choreographer; you are the costume designer; you are the lighting manager, art director, set designer, electrician, best boy and grip.
Upon acknowledging the cacophony of mental processes, the reasons for them and your ability to effectively process useful problem-solving data when it is sorted and lain in front of you, you can then appoint a single Director of your life, and turn the confusion over to him/her/it (let your subconscious reactive mind take over…it’s no more than a computer and simply is not wired for making the mistakes your conscious analytic mind does).
The Director is that entity you have chosen to take charge and to decipher and resolve all conflicting data that comes into your mind from your many selves. This entity is entrusted with directing all the others to shut the hell up and do what they are supposed to do. This is your “Director,” your ”Business manger” your “Chairman of the Board,” your God, Krishna or whatever title you’d like to ascribe to it. I refer to mine as “Director” and I have put him in charge of all of my goals and the hard stuff of my life…and you know…he REALLY does a good job.
When communicating with your Director you must always do it in writing, and in your own hand (pencil preferably). Mental supplication just gets lost in the chaos of your mind. By simply writing a letter to him/her/it explaining your situation as succinctly as you can without leaving out the essence of your desire or goal, your are given what you ask for. In the letter, you state exactly what it is that you want and what you’ve done, if anything, to ease the problem and when you’d like your need to be manifested. Then you fold the letter and place it in your “Director’s Box” put it in a private (secret) place and leave it alone.
Your letter might look something like this:
Dear Director,
I currently find myself in a difficult position, and truly need your help. This month’s house payments and car payments are due and I do not have the money at the moment. Since these sums are all due and payable within one week (by 08/16/02 at the latest), I need enough to cover them as soon as possible. I ask that you give me a final solution and the wherewithal to carry it out within this time frame. I will accept cash, check or money order…or anything immediately salable or pawn-able that could get me out of the mess I’m in.
I am hereby leaving this request with you and expect it to be fulfilled within the stated above date if at all possible. The amount requested is $3,600.00, but I could get by for a while on just $2,600 if I had to.
Respectfully,
-0-
Understand that your director can only do what is reasonably possible and cannot and will not do the impossible. Therefore if you ask for $100,000 by next Tuesday and don’t indicate that some lesser amount and a later date would work too, your director will not stop short at just $98,000 that might be available instead. Over statement or being too specific could create a failure in the process and you could simply end up with nothing. It’s very important that you be specific about what it is you want, but that you never are too exclusively specific. In other words, if you ask for a new car of a certain type and specify that it should be red, there might be a hundred cars just like the one you asked for, but since none of them are red your director might not present them to you because you specifically said you wanted a red one.
By the way, this is exactly the process I used to get the Nissan Pathfinder than I’ve been driving since 1985. We were VERY short of credit in 1985 and my Jeep Cherokee was on its last leg. So I wrote to my director explaining that I needed a new SUV with a stereo tape deck and a rear spare tire rack and that I wanted a red one, but that I would take any color. Viola, two days after putting the note in my director’s box, I was driving past a Nissan dealership in Arcadia, CA where I saw a red Pathfinder parked on the lot. I stopped and got out to inquire about the possibility of getting financed without any credit, and within one hour I was driving it home…no down…no credit application (just killer interest rate…which was fine with me, given my circumstances, and since I had to have a good car and since the payment amount was not that crucial to me).
Here’s another letter I wrote last year after having sold our home in Granada Hills (bought for $300,000 sold for $510,000):
01-02-02
Dear Director,
I need a new home by or before the end of January of this year about a month away). I wish to pay nothing out of picket and wish to avoid any credit qualifying or approval process. I choose to continue living in the San Fernando Valley and would prefer the Northern end, but would accept any five bedroom in good condition the cities of Granada Hills, Chatsworth, Woodland Hills, Canoga Park, Tarzana, Reseda, Topanga Canyon or Sherman Oaks.
I am beginning today to make FSBO and landlord calls.
Thank you for handling this as quickly as possible
Respectfully,
Bill J. Gatten
Playgirl Centerfold(er)
In making the calls I found three houses on the first day that were available with seller financing, but one was not at all what we wanted and the other two sellers both wanted some cash up front. The last one I spoke with wanted a full $150,000 up front, but indicated he’d stay on the loan. Within 15 minutes of that call a Network member called who needed an up-leg 1031 exchange property, and who had $150,000 she had to get rid of within two weeks or pay big taxes on it. Well, we moved into our new home within two weeks, and the Network member and we are now 50:50 partners (EHT Eq. Share) in a property we got for $530,000, which is now worth about $600,000 and which will be worth $800,000 when all my refurbishments are completed (thanks director).
Tools you will need: 1) piece of paper 2) pen or pencil, 3) box, 4) secret spot 5) brain (optional)
Good luck in everything you try, and congratulations on everything you do,
Bill Gatten
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
The friend, a woman of 50 or so, confided in me that she was flat broke, that she'd lot her business, didn't know where this month's rent was coming from...or even this month's food, and that her unemployment benefits had run out. She said she knew she would make it in the real estate investing business…eventually…and just wanted some advice on how to get the ball rolling as quickly as possible.
Well, being the old softie I am, I couldn’t resist telling her to go pound salt, get the hell out of my office, and go bitch to someone else. I had enough problems of my own what with my Mercedes’ transmission dragging on the ground, my Black Lab being pregnant by a sheep, a bad case of prickly heat and a gangrenous left…(oh never mind).
No! No!! Just kidding...I wouldn't do that (…oh ye of little faith…).
Here's what actually transpired:
I told my friend (...for the sake of confidentiality we'll call her "Suzie"...although her real name is Evelyn Fenster) that what she needed to do was stop trying to chop down the trees for a while, and spend some time sharpening her axe. This, of course is not what a person who sees themselves as ‘down-and-out’ and on their last leg wants to hear. What would be much preferred is to hear that there is a guardian angel hovering two feet above who is about to drop a load of fresh manna on them at any minute (BTW did you know that “manna” is the etymological root of “manure”? And, hey, who needs that?).
Well, OK, the guardian angel…it may have been there, but if so it was probably just sitting on a chair smiling understandingly and waiting to see how “Suzie” was going to attack her challenge and thereby get to know herself...and her strengths…and qualify for entry into the next realm whatever and wherever that might be. I’m fairly positive that Heaven is a private Island off the cost of Maui, and that Hell is the “It’s a Small World” attraction at Disney Land (…humming that song in your head now, aren’t you? It won’t stop for days).
Oh yeah, my suggestion to Suzie… Well, it was that for the quickest fix, she might use a technique that was given to me by my son Michael and which I have used very successfully in the past. That is the technique of appointing a Director or “chairman” or “manger of life affairs” to manage the fulfillment of one’s needs and goals.
The essence of the “Director” concept an the acceptance of the idea that in our daily lives we are 100% in control of everything that happens to us (or befalls us). It is therefore ‘we’ who create the situations we find ourselves in, and it is we who gets ourselves out of those predicaments one way or the other.
The various methods we use to get oiurselves out of bad situations include: doing nothing and languishing in a stupor until it blows over; admitting defeat and living on pity and handouts; mugging old ladies; living off the government; knocking over ATM machines; prostitution ('tried that...cut my price twice and still no takers…except for some old guy in a rubber chicken suit who I turned down when I found he was lying about being able to lay golden eggs); robbing a bank or liquor store, or just getting drunk and staying that way.
OR…we can just STOP.
We can relax and let depression take over for a while and let it naturally distort catalogue our problems. The process of depression is the scrambling, distortion and magnification of the various elemental components of our lives. Depression itself, if not actue and pathological, is a natural and often time healthy protection device that we subconsciously call upon in order to better see and finally deal with its causes. Contrary to what most people think, non-clinical depression is a useful device that allows us, if we remain rational through it, to separate our dilemmas and the quandaries from each other.
For a little review, a dilemma is a choice between two bad things (e.g., the frying pan or the fire); a quandary is a state of perplexity in not knowing what to do next. The former is unsolvable and should be tossed into your mental trash can…it’ll either go away by itself, work itself out, or kill you, no matter what you do. A true dilemma doesn’t need, and cannot use, your help or energy. The latter—the quandary: now that’s the good one. A quandary is always solvable by simply eliminating indecision and procrastination. The problem with quandaries though is that they are comprised of hundreds of tiny microscopic components that we’d never be able to see if we opted to take a pill or a bottle of booze in order to hide or run away from our natural “depression reflex.”
What are the myriad components of depression? They are all the random solutions your “internal staff” is coming up with…all at the same time: they are manifested in a cacophony of interlaced and confusing demands, laments, bright ideas, test solutions and a bunch of begging and mewling that simply cannot be sorted and processed by one brain.
Your male side wants one thing; your female side wants another; your child-self wants something else; your adult-self wants the opposite; your parent-self has a completely different need. In depression your Fear is demanding retreat while your impetuous and curious personality is afraid to make a decision as to whether to stand and figt or move on. The fact is that all of these disparate inputs are blocking and neutralizing each other; thereby short-circuiting any possibility for logical mental processes, mush less resolution and forcing the sufferer to lapse into worry and despair. Unlike the dilemma, the answer to the quandary is always there, but neutralized by all the other random inputs.
The solution? First of all, one must come to grips with the fact that your own life is no more than a movie script that you are both writing and acting in. You wrote it, you are directing it and you are playing all the parts. You are the camera crew; you are the makeup man/woman; you are the choreographer; you are the costume designer; you are the lighting manager, art director, set designer, electrician, best boy and grip.
Upon acknowledging the cacophony of mental processes, the reasons for them and your ability to effectively process useful problem-solving data when it is sorted and lain in front of you, you can then appoint a single Director of your life, and turn the confusion over to him/her/it (let your subconscious reactive mind take over…it’s no more than a computer and simply is not wired for making the mistakes your conscious analytic mind does).
The Director is that entity you have chosen to take charge and to decipher and resolve all conflicting data that comes into your mind from your many selves. This entity is entrusted with directing all the others to shut the hell up and do what they are supposed to do. This is your “Director,” your ”Business manger” your “Chairman of the Board,” your God, Krishna or whatever title you’d like to ascribe to it. I refer to mine as “Director” and I have put him in charge of all of my goals and the hard stuff of my life…and you know…he REALLY does a good job.
When communicating with your Director you must always do it in writing, and in your own hand (pencil preferably). Mental supplication just gets lost in the chaos of your mind. By simply writing a letter to him/her/it explaining your situation as succinctly as you can without leaving out the essence of your desire or goal, your are given what you ask for. In the letter, you state exactly what it is that you want and what you’ve done, if anything, to ease the problem and when you’d like your need to be manifested. Then you fold the letter and place it in your “Director’s Box” put it in a private (secret) place and leave it alone.
Your letter might look something like this:
Dear Director,
I currently find myself in a difficult position, and truly need your help. This month’s house payments and car payments are due and I do not have the money at the moment. Since these sums are all due and payable within one week (by 08/16/02 at the latest), I need enough to cover them as soon as possible. I ask that you give me a final solution and the wherewithal to carry it out within this time frame. I will accept cash, check or money order…or anything immediately salable or pawn-able that could get me out of the mess I’m in.
I am hereby leaving this request with you and expect it to be fulfilled within the stated above date if at all possible. The amount requested is $3,600.00, but I could get by for a while on just $2,600 if I had to.
Respectfully,
-0-
Understand that your director can only do what is reasonably possible and cannot and will not do the impossible. Therefore if you ask for $100,000 by next Tuesday and don’t indicate that some lesser amount and a later date would work too, your director will not stop short at just $98,000 that might be available instead. Over statement or being too specific could create a failure in the process and you could simply end up with nothing. It’s very important that you be specific about what it is you want, but that you never are too exclusively specific. In other words, if you ask for a new car of a certain type and specify that it should be red, there might be a hundred cars just like the one you asked for, but since none of them are red your director might not present them to you because you specifically said you wanted a red one.
By the way, this is exactly the process I used to get the Nissan Pathfinder than I’ve been driving since 1985. We were VERY short of credit in 1985 and my Jeep Cherokee was on its last leg. So I wrote to my director explaining that I needed a new SUV with a stereo tape deck and a rear spare tire rack and that I wanted a red one, but that I would take any color. Viola, two days after putting the note in my director’s box, I was driving past a Nissan dealership in Arcadia, CA where I saw a red Pathfinder parked on the lot. I stopped and got out to inquire about the possibility of getting financed without any credit, and within one hour I was driving it home…no down…no credit application (just killer interest rate…which was fine with me, given my circumstances, and since I had to have a good car and since the payment amount was not that crucial to me).
Here’s another letter I wrote last year after having sold our home in Granada Hills (bought for $300,000 sold for $510,000):
01-02-02
Dear Director,
I need a new home by or before the end of January of this year about a month away). I wish to pay nothing out of picket and wish to avoid any credit qualifying or approval process. I choose to continue living in the San Fernando Valley and would prefer the Northern end, but would accept any five bedroom in good condition the cities of Granada Hills, Chatsworth, Woodland Hills, Canoga Park, Tarzana, Reseda, Topanga Canyon or Sherman Oaks.
I am beginning today to make FSBO and landlord calls.
Thank you for handling this as quickly as possible
Respectfully,
Bill J. Gatten
Playgirl Centerfold(er)
In making the calls I found three houses on the first day that were available with seller financing, but one was not at all what we wanted and the other two sellers both wanted some cash up front. The last one I spoke with wanted a full $150,000 up front, but indicated he’d stay on the loan. Within 15 minutes of that call a Network member called who needed an up-leg 1031 exchange property, and who had $150,000 she had to get rid of within two weeks or pay big taxes on it. Well, we moved into our new home within two weeks, and the Network member and we are now 50:50 partners (EHT Eq. Share) in a property we got for $530,000, which is now worth about $600,000 and which will be worth $800,000 when all my refurbishments are completed (thanks director).
Tools you will need: 1) piece of paper 2) pen or pencil, 3) box, 4) secret spot 5) brain (optional)
Good luck in everything you try, and congratulations on everything you do,
Bill Gatten
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, August 16, 2007
PRE-FORECLOSURE AND THE NARS PACTRUST™ MORTGAGOR REMAINING IN THE PROPERTY.
By Bill J. Gatten
When dealing with pre-foreclosures it’s always best (when possible) to get the property under contract and just wave bye-bye to the departing defaulting party. Many would consider it unwise to become embroiled with the mess that too often arises “later on down the line.” After the homeowner’s financial situation improves, these folks somehow forget your name and that you were once their only hope, their ‘saving grace,’ and their guardian angel during that minor setback of so very long ago.
We regularly receive reports from good intentioned folks across the country who thought they were doing something nice for someone (while helping themselves in the process, of course), but then got zapped in the pants a year or so later when the cause for the original crises had eased up. It seems that some of those formerly groveling ever-grateful recipients of goodwill tend to turn real mean…because an attorney says they can…and should.
Therefore, in those cases where an owner insists that the only way they’ll deal with you is to remain in the property after you bring their loan current (i.e., in return for giving you a stake in future appreciation potential and maybe some portion of the existing equity), we recommend the NARS PACTrust™.
First off, it’s a good idea to never deal with a property that is IN foreclosure at the time of documentation: get it OUT of foreclosure first, and then deal with it. In addition, in order to avoid risks of claims of impropriety later on, make certain that you always deal with the property and the delinquent party only at the property’s true Fair Market Value. That is to say: Try to come in at a reasonable assessment of the real value, minus your anticipated expenses. Such expenses would, of course, be closing costs, refurbishment costs, arrearages, penalties paid, marketing costs, etc. If there is equity in the property at inception, it’s good to leave the owner of record with no less than half of it intact after your cost computations. The homeowner’s equity then becomes their contribution to the land trust: i.e., the “Settlor Beneficiary Contribution,” which amount is fully refundable at termination, prior to any other distribution of sale (or re-fi) proceeds.
After assessing the viability of the transaction and the likelihood that the owner will be able to cover the payments, if given a second chance, one might consider the following:
1. Upon deciding you’d like to proceed with the transaction (after comps, title search, zoning records search, inspection, etc.), obtain a letter of authorization from the homeowner that will allow you to speak with the lender/s about the loan/s and its/their problems. Assure yourself in that conversation that reinstatement of the loan will take place it is brought current (be careful here, in some cases they will take your money, add it to principal reduction and continue on with the foreclosure if they want to). Also, be sure to try to negotiate with the lender for a forbearance of he arrearages: e.g., possibly having them added to the end of the loan; allowing a temporary moratorium on payments; or perhaps breaking the total down into small monthly increments for a while. Note that in this conversation, you are a “friend of the borrower who is considering helping him/her reinstate the loan.
2. Once the arrearages are forborne or covered by cashier', then open a silent Escrow (note that in all NARS PACTrusts™ handled through our company, we work exclusively with American Title Escrow throughout the U.S.).
2. The property is then placed into a title-holding land trust (outside of Escrow), vesting 100% of the legal and equitable title ownership with a third-party trustee (we utilize our trustee, PAC Holdings, a Non-Profit California Corp.…but that part’s up to you).
3. An Assignment of Beneficiary Interest…to you the investor…is then structured. A silent rider agreement will indicate the percentage of your beneficiary interest (40%, 50, 60%, etc.) in accordance with whatever percentage of profits are to be shared upon disposition at termination.
4. Next, the Beneficiary Agreement is created…between yourself (as the “Co-beneficiary”) and the borrower of record (the “Settlor Beneficiary”). This silent agreement delineates each party’s benefits and responsibilities relative to the trust property. It also provides confirmation of all directions to the trustee concerning title matters and the disposition of the property at the termination of the trust (at full Fair Market Value). Obviously, at termination should either of the beneficiaries choose to become the purchaser at termination they may do so…at full Fair Market Value only, less any moneys due them from the trust (e.g., their share of the profits). That is to say that any initial closing costs or equity held at inception is returned to the beneficiaries prior to any other distribution of proceeds.).
5. And following the close of Escrow, an Occupancy Agreement between the formerly defaulted homeowner and the new true owner of the property--the Trustee--is created. In this agreement, the former owner pays a lease payment sufficient to cover all monthly obligations. In order to convey tax benefits, this agreement is set up in a “triple-net” form: which obligates the tenant to all principal, interest, property tax, insurance; and to accept responsibility for all maintenance and repairs…the “Burdens of Ownership (See IRC 163(h)4(D).” Should any sum be paid to collection service, which is over and above the actual amounts due creditors, it will of course, accrue to the Investor Beneficiary (you), as positive cash flow.
Especially note that in the above scenario, even though ownership benefits (including full income tax deduction benefits) are held intact: the mortgagor (the borrower) no longer “owns” the property. The nature of the underlying land trust is such that its trustee is the owner and holder of all legal and equitable title to the trust property. Furthermore, there is no Purchase-Option or pre-determined bargain buy-out provision in the NARS PACTrust. Neither is there a loan or interest consideration between parties. The property remains a residence by at least one of the “acquiring parties…the beneficiaries of the land trust (i.e., in conformity with CA. CC 1695-1695.17). The property is not in “foreclosure” at the time of transfer to the trust. There has been no effective compromise of regulations concerning “equity-purchaser” or “foreclosure consultant” laws (re. the Ca. Civ. Code §§1695 and 2945).
And, too, in the event of a default by the “tenant beneficiary,” simple eviction takes place in lieu of a judicial foreclosure process. This is because, since the transaction’s structure is hinged upon a bona fide (Illinois-type) land trust, the tenant can never claim an “equitable interest” in the property to avoid Eviction and to force time and money consuming Judicial Foreclosure processes. Also of major importance, is the fact that in the NARS PACTrust™ scenario, once the tenant beneficiary (the former owner) has defaulted in its obligations, the contract provides that his or her beneficiary interest in the trust will not be extinguished; but instead the default within itself will constructively constitute an offer by the defaulting party to sell his or her interest in the trust at full Fair Market Value, to the non-defaulting beneficiary/ies. Such fair market value purchase amount, if contested, would then have to be proven within, say, 30 days: fully at the contesting (defaulting) party’s expense…and only by means of a full (and quite costly) MAI appraisal; and following a mandatory payment of, say, a $2,000, $3,000, etc. Default Fee.
For example, in terms of the former owner’s second failure to perform, let’s say you offer a buy-out of the defaulting tenant’s interest for one dollar plus, maybe, any equity he or she had held at inception. At this point, if the defaulting party deems the offer too low, he or she has a right to prove it so, and to demand and collect what is rightfully due them. However, also note that it is agreed in the beneficiary agreement that such proof of value must only be by means of an M.A.I. Appraisal (quite expensive), and that the buy-out would only follow payment of the established Default Fee.
Then at that point, if the defaulting party is willing to spend the money and effort to prove he is owned more, and would succeed in his or her effort: then the full amount proven would have to be paid: however, the contract provides that the method of payment of the sum owed, shall be means of an UNSECURED promissory note. This note is then scheduled for retirement no sooner that the property sells at the trust’s originally scheduled termination date: AFTER a return of all of the investor’s (your) original contribution, beginning equity and appropriate share of net proceeds.
A FINAL CAVEAT…
Remain well aware of, and well versed in, your own local foreclosure consultant laws: especially as they pertain to investors and Realtors® who would purport to “save” someone from foreclosure by effectively taking advantage of them. As you can see, the NARS PACTrust™ should avoid the pitfalls of “foreclosure bailouts”; but one would nonetheless be very well advised to rely only the advice of his or her own knowledgeable and competent legal advisors in such matters.
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
When dealing with pre-foreclosures it’s always best (when possible) to get the property under contract and just wave bye-bye to the departing defaulting party. Many would consider it unwise to become embroiled with the mess that too often arises “later on down the line.” After the homeowner’s financial situation improves, these folks somehow forget your name and that you were once their only hope, their ‘saving grace,’ and their guardian angel during that minor setback of so very long ago.
We regularly receive reports from good intentioned folks across the country who thought they were doing something nice for someone (while helping themselves in the process, of course), but then got zapped in the pants a year or so later when the cause for the original crises had eased up. It seems that some of those formerly groveling ever-grateful recipients of goodwill tend to turn real mean…because an attorney says they can…and should.
Therefore, in those cases where an owner insists that the only way they’ll deal with you is to remain in the property after you bring their loan current (i.e., in return for giving you a stake in future appreciation potential and maybe some portion of the existing equity), we recommend the NARS PACTrust™.
First off, it’s a good idea to never deal with a property that is IN foreclosure at the time of documentation: get it OUT of foreclosure first, and then deal with it. In addition, in order to avoid risks of claims of impropriety later on, make certain that you always deal with the property and the delinquent party only at the property’s true Fair Market Value. That is to say: Try to come in at a reasonable assessment of the real value, minus your anticipated expenses. Such expenses would, of course, be closing costs, refurbishment costs, arrearages, penalties paid, marketing costs, etc. If there is equity in the property at inception, it’s good to leave the owner of record with no less than half of it intact after your cost computations. The homeowner’s equity then becomes their contribution to the land trust: i.e., the “Settlor Beneficiary Contribution,” which amount is fully refundable at termination, prior to any other distribution of sale (or re-fi) proceeds.
After assessing the viability of the transaction and the likelihood that the owner will be able to cover the payments, if given a second chance, one might consider the following:
1. Upon deciding you’d like to proceed with the transaction (after comps, title search, zoning records search, inspection, etc.), obtain a letter of authorization from the homeowner that will allow you to speak with the lender/s about the loan/s and its/their problems. Assure yourself in that conversation that reinstatement of the loan will take place it is brought current (be careful here, in some cases they will take your money, add it to principal reduction and continue on with the foreclosure if they want to). Also, be sure to try to negotiate with the lender for a forbearance of he arrearages: e.g., possibly having them added to the end of the loan; allowing a temporary moratorium on payments; or perhaps breaking the total down into small monthly increments for a while. Note that in this conversation, you are a “friend of the borrower who is considering helping him/her reinstate the loan.
2. Once the arrearages are forborne or covered by cashier', then open a silent Escrow (note that in all NARS PACTrusts™ handled through our company, we work exclusively with American Title Escrow throughout the U.S.).
2. The property is then placed into a title-holding land trust (outside of Escrow), vesting 100% of the legal and equitable title ownership with a third-party trustee (we utilize our trustee, PAC Holdings, a Non-Profit California Corp.…but that part’s up to you).
3. An Assignment of Beneficiary Interest…to you the investor…is then structured. A silent rider agreement will indicate the percentage of your beneficiary interest (40%, 50, 60%, etc.) in accordance with whatever percentage of profits are to be shared upon disposition at termination.
4. Next, the Beneficiary Agreement is created…between yourself (as the “Co-beneficiary”) and the borrower of record (the “Settlor Beneficiary”). This silent agreement delineates each party’s benefits and responsibilities relative to the trust property. It also provides confirmation of all directions to the trustee concerning title matters and the disposition of the property at the termination of the trust (at full Fair Market Value). Obviously, at termination should either of the beneficiaries choose to become the purchaser at termination they may do so…at full Fair Market Value only, less any moneys due them from the trust (e.g., their share of the profits). That is to say that any initial closing costs or equity held at inception is returned to the beneficiaries prior to any other distribution of proceeds.).
5. And following the close of Escrow, an Occupancy Agreement between the formerly defaulted homeowner and the new true owner of the property--the Trustee--is created. In this agreement, the former owner pays a lease payment sufficient to cover all monthly obligations. In order to convey tax benefits, this agreement is set up in a “triple-net” form: which obligates the tenant to all principal, interest, property tax, insurance; and to accept responsibility for all maintenance and repairs…the “Burdens of Ownership (See IRC 163(h)4(D).” Should any sum be paid to collection service, which is over and above the actual amounts due creditors, it will of course, accrue to the Investor Beneficiary (you), as positive cash flow.
Especially note that in the above scenario, even though ownership benefits (including full income tax deduction benefits) are held intact: the mortgagor (the borrower) no longer “owns” the property. The nature of the underlying land trust is such that its trustee is the owner and holder of all legal and equitable title to the trust property. Furthermore, there is no Purchase-Option or pre-determined bargain buy-out provision in the NARS PACTrust. Neither is there a loan or interest consideration between parties. The property remains a residence by at least one of the “acquiring parties…the beneficiaries of the land trust (i.e., in conformity with CA. CC 1695-1695.17). The property is not in “foreclosure” at the time of transfer to the trust. There has been no effective compromise of regulations concerning “equity-purchaser” or “foreclosure consultant” laws (re. the Ca. Civ. Code §§1695 and 2945).
And, too, in the event of a default by the “tenant beneficiary,” simple eviction takes place in lieu of a judicial foreclosure process. This is because, since the transaction’s structure is hinged upon a bona fide (Illinois-type) land trust, the tenant can never claim an “equitable interest” in the property to avoid Eviction and to force time and money consuming Judicial Foreclosure processes. Also of major importance, is the fact that in the NARS PACTrust™ scenario, once the tenant beneficiary (the former owner) has defaulted in its obligations, the contract provides that his or her beneficiary interest in the trust will not be extinguished; but instead the default within itself will constructively constitute an offer by the defaulting party to sell his or her interest in the trust at full Fair Market Value, to the non-defaulting beneficiary/ies. Such fair market value purchase amount, if contested, would then have to be proven within, say, 30 days: fully at the contesting (defaulting) party’s expense…and only by means of a full (and quite costly) MAI appraisal; and following a mandatory payment of, say, a $2,000, $3,000, etc. Default Fee.
For example, in terms of the former owner’s second failure to perform, let’s say you offer a buy-out of the defaulting tenant’s interest for one dollar plus, maybe, any equity he or she had held at inception. At this point, if the defaulting party deems the offer too low, he or she has a right to prove it so, and to demand and collect what is rightfully due them. However, also note that it is agreed in the beneficiary agreement that such proof of value must only be by means of an M.A.I. Appraisal (quite expensive), and that the buy-out would only follow payment of the established Default Fee.
Then at that point, if the defaulting party is willing to spend the money and effort to prove he is owned more, and would succeed in his or her effort: then the full amount proven would have to be paid: however, the contract provides that the method of payment of the sum owed, shall be means of an UNSECURED promissory note. This note is then scheduled for retirement no sooner that the property sells at the trust’s originally scheduled termination date: AFTER a return of all of the investor’s (your) original contribution, beginning equity and appropriate share of net proceeds.
A FINAL CAVEAT…
Remain well aware of, and well versed in, your own local foreclosure consultant laws: especially as they pertain to investors and Realtors® who would purport to “save” someone from foreclosure by effectively taking advantage of them. As you can see, the NARS PACTrust™ should avoid the pitfalls of “foreclosure bailouts”; but one would nonetheless be very well advised to rely only the advice of his or her own knowledgeable and competent legal advisors in such matters.
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
TWENTY-TWO STEPS TO FREE REAL ESTATE
By Bill J. Gatten, Author of ‘No Down!
No New Loan!’ And ‘Making it BIG in
Creative Real Estate and Keeping It…This
Time,’ and semi-nude Chip and Dale Dancer
(…yep the chipmunks)
The following is an open letter that I wrote to my cousin John, in Orlando Florida after his having informed me in an E-mail that there were over 6,000 foreclosures within a few miles of him, and suggesting that maybe I should move to Orlando (which I’d love to do, but there are 13,000 foreclosures where I live, and as of late, I’ve developed a real affinity for gang wars, graffiti and drive-by shootings).
Dear John,
Regarding those foreclosure opportunities, with your good looks and my brains, we could buy them up. We could partner on dozens and dozens of them.
Here’s the deal: I contact the sellers, run the ads screen the calls and then advertise for and screen the buyer calls with our toll-free Adtrakker lines and do all the documentation and collections. You need merely get the Foreclosure lists (once a week), pick out the acceptable areas, and head-up any refurbishment or repairs that might be needed There is no, or very little, cash out of pocket. Our resident beneficiaries pay for all of that.
Some of them we resell for cash, and some (most) we hold for old age (which is creeping up on me, John: I don’t even buy green bananas anymore, and I’m going through mucilage and Tucks like they were Diet Pepsi and Crepes).
OK, Here's how the ‘holding’ part works:
1. We create a Limited Liability Company to be funded on our first deal at the close of Escrow (the "Turko-Amazon Mining Co, a Nevada LLC" with you and me (or you’ns and us’ns) as co-members...you are the ‘managing’ member)
2. You obtain foreclosure data from the courthouse, or better yet, from a local FC publication (a few hundred buck a year)
4. I commence a five-piece mailing program to all distressed (foreclosed upon) homeowners, telling them that we buy houses for Full Price, All Cash or Terms, any condition (60%-65% of FMV is our full price offer which we get via a ‘hard money’ no qual loan: anything else would necessitate ‘terms,’ wherein the seller-carries and gets paid at the end of the trust).
5. I identify those distressed homeowners who are willing to deal with us (i.e., they are the only ones who answer my mailings. And when they call they get a recorded messages explaining exactly what we can do for them…if they’re interested, they then call my private toll-free 800 line)
6. I offer to take over their loan, bring the arrearages current (i.e., say, $5-6,000 or ?), get them out from under the property, and reestablish their credit with their lender
7. If they like what I have to say, we take a 30-45 Day Non-Exclusive Purchase Option from the homeowner (no option fee, no obligation…they can sell to anyone during the option period: but they have to give us a 10 days notice to exercise our option if they do get another offer)
8. We order and obtain a reinstatement quote from the lender
9. During the option term, I advertise for our resident beneficiary (buyer) via the newspaper and a hangman sign that you place on the property...the ad and the sign say: "No bank qual. No down payment. 3 pmts and clos. costs moves you in (e.g., which sum comes to, say, $10-11,000)."
10. Upon locating our buyer, we create a land trust to hold the property’s title (the homeowner being the ‘only’ beneficiary, at that point)
11. We open Escrow
12. We set our “Mutually Agreed Value” at 20% 30% or (?) ‘above’ what we owe on the mortgages(s) and/or any money owed to, and carried by, the former homeowner, if any.
13. The distressed owner leaves the property
14. We place the buyer's money into Escrow
15. We remit all sums necessary to bring the mortgage loan current (i.e., the $5-6,000)
15. We take an assignment of 90% of the beneficiary interest in the trust, with the other 10% remaining with the homeowner: which percentage will be forfeited to the LLC at the trust's termination (leaving the percentage with the borrower of record avoids open due-on-sale violation re. the existing financing, and avoids and transfer or conveyance tax or reassessment by the county…as the homeowner has only placed his property into an inter-vivos trust and has not relinquished more than 50% of the Power of Direction)
16. We now take a ‘Limited Power of Attorney’ from the former homeowner so that we can “vote” in his stead, directing the trustee on his/her behalf throughout the agreement (as far as he’s concerned, he sold the house and needn’t be involved in any day-to-day functions relative to it).
17. We next assign to our ‘resident beneficiary (our buyer)’ a 50% beneficiary interest in the trust (i.e., they then receive 100% of the benefits of homeownership, including income tax write-off, and 50% of the principal reduction and 50% of any future appreciation over the term): they get 100 of the bundle of rights in fee-simple real estate ownership, except for our half of the profit on sale.
18. We set the resident beneficiary’s monthly payments at, say, $100-$200.00 above what our actual payments are, and we set the Mutually Agreed Value (the amount above which profits will be shared) at some amount greater than what we got the property for.
19. At this point the trust leases the property to the resident beneficiary on a ‘triple-net’ lease basis for the term of the land trust (i.e., a full contractual obligation to pay the mortgage interest, property tax and insurance).
20. We then put the overage from Escrow into our LLC's bank account
21. The positive cash continues to flow to our LLC throughout the agreement, while the resident beneficiary pays all the bills and handles all maintenance, management and upkeep.
22. At the end of the (5, 7 10 or ? year) term, the property is sold for ‘Fair Market Value’: either to the resident beneficiary or to someone else (if the resident buys, he buys at FMV, MINUS the money owed to him from his 50% share in profits); and our LLC receives 100% of the [“bumped”] equity that we’ve been carrying from inception, and 50% of all net profits (which, when added to the up-front money we got in the beginning and our positive cash flow along the way, creates a nice incentive to do a whole bunch of these babies).
John! Free houses! They’re everywhere! They’re everywhere!
Your Next O’ Kin,
Cuz Bill
No New Loan!’ And ‘Making it BIG in
Creative Real Estate and Keeping It…This
Time,’ and semi-nude Chip and Dale Dancer
(…yep the chipmunks)
The following is an open letter that I wrote to my cousin John, in Orlando Florida after his having informed me in an E-mail that there were over 6,000 foreclosures within a few miles of him, and suggesting that maybe I should move to Orlando (which I’d love to do, but there are 13,000 foreclosures where I live, and as of late, I’ve developed a real affinity for gang wars, graffiti and drive-by shootings).
Dear John,
Regarding those foreclosure opportunities, with your good looks and my brains, we could buy them up. We could partner on dozens and dozens of them.
Here’s the deal: I contact the sellers, run the ads screen the calls and then advertise for and screen the buyer calls with our toll-free Adtrakker lines and do all the documentation and collections. You need merely get the Foreclosure lists (once a week), pick out the acceptable areas, and head-up any refurbishment or repairs that might be needed There is no, or very little, cash out of pocket. Our resident beneficiaries pay for all of that.
Some of them we resell for cash, and some (most) we hold for old age (which is creeping up on me, John: I don’t even buy green bananas anymore, and I’m going through mucilage and Tucks like they were Diet Pepsi and Crepes).
OK, Here's how the ‘holding’ part works:
1. We create a Limited Liability Company to be funded on our first deal at the close of Escrow (the "Turko-Amazon Mining Co, a Nevada LLC" with you and me (or you’ns and us’ns) as co-members...you are the ‘managing’ member)
2. You obtain foreclosure data from the courthouse, or better yet, from a local FC publication (a few hundred buck a year)
4. I commence a five-piece mailing program to all distressed (foreclosed upon) homeowners, telling them that we buy houses for Full Price, All Cash or Terms, any condition (60%-65% of FMV is our full price offer which we get via a ‘hard money’ no qual loan: anything else would necessitate ‘terms,’ wherein the seller-carries and gets paid at the end of the trust).
5. I identify those distressed homeowners who are willing to deal with us (i.e., they are the only ones who answer my mailings. And when they call they get a recorded messages explaining exactly what we can do for them…if they’re interested, they then call my private toll-free 800 line)
6. I offer to take over their loan, bring the arrearages current (i.e., say, $5-6,000 or ?), get them out from under the property, and reestablish their credit with their lender
7. If they like what I have to say, we take a 30-45 Day Non-Exclusive Purchase Option from the homeowner (no option fee, no obligation…they can sell to anyone during the option period: but they have to give us a 10 days notice to exercise our option if they do get another offer)
8. We order and obtain a reinstatement quote from the lender
9. During the option term, I advertise for our resident beneficiary (buyer) via the newspaper and a hangman sign that you place on the property...the ad and the sign say: "No bank qual. No down payment. 3 pmts and clos. costs moves you in (e.g., which sum comes to, say, $10-11,000)."
10. Upon locating our buyer, we create a land trust to hold the property’s title (the homeowner being the ‘only’ beneficiary, at that point)
11. We open Escrow
12. We set our “Mutually Agreed Value” at 20% 30% or (?) ‘above’ what we owe on the mortgages(s) and/or any money owed to, and carried by, the former homeowner, if any.
13. The distressed owner leaves the property
14. We place the buyer's money into Escrow
15. We remit all sums necessary to bring the mortgage loan current (i.e., the $5-6,000)
15. We take an assignment of 90% of the beneficiary interest in the trust, with the other 10% remaining with the homeowner: which percentage will be forfeited to the LLC at the trust's termination (leaving the percentage with the borrower of record avoids open due-on-sale violation re. the existing financing, and avoids and transfer or conveyance tax or reassessment by the county…as the homeowner has only placed his property into an inter-vivos trust and has not relinquished more than 50% of the Power of Direction)
16. We now take a ‘Limited Power of Attorney’ from the former homeowner so that we can “vote” in his stead, directing the trustee on his/her behalf throughout the agreement (as far as he’s concerned, he sold the house and needn’t be involved in any day-to-day functions relative to it).
17. We next assign to our ‘resident beneficiary (our buyer)’ a 50% beneficiary interest in the trust (i.e., they then receive 100% of the benefits of homeownership, including income tax write-off, and 50% of the principal reduction and 50% of any future appreciation over the term): they get 100 of the bundle of rights in fee-simple real estate ownership, except for our half of the profit on sale.
18. We set the resident beneficiary’s monthly payments at, say, $100-$200.00 above what our actual payments are, and we set the Mutually Agreed Value (the amount above which profits will be shared) at some amount greater than what we got the property for.
19. At this point the trust leases the property to the resident beneficiary on a ‘triple-net’ lease basis for the term of the land trust (i.e., a full contractual obligation to pay the mortgage interest, property tax and insurance).
20. We then put the overage from Escrow into our LLC's bank account
21. The positive cash continues to flow to our LLC throughout the agreement, while the resident beneficiary pays all the bills and handles all maintenance, management and upkeep.
22. At the end of the (5, 7 10 or ? year) term, the property is sold for ‘Fair Market Value’: either to the resident beneficiary or to someone else (if the resident buys, he buys at FMV, MINUS the money owed to him from his 50% share in profits); and our LLC receives 100% of the [“bumped”] equity that we’ve been carrying from inception, and 50% of all net profits (which, when added to the up-front money we got in the beginning and our positive cash flow along the way, creates a nice incentive to do a whole bunch of these babies).
John! Free houses! They’re everywhere! They’re everywhere!
Your Next O’ Kin,
Cuz Bill
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