we advocate the use of a bonded corporate trustee because…
because a corporation cannot die and allow the land trust’s corpus (assets) to end up in probate or subjected to estate taxation.
because of their professionalism and experience…a corporation is not likely to yield to legal threats and pressure
because of the corporate shielding of the members (stockholder-beneficiaries) relative to all of the real estate titles they hold
because of its ability to function in Trustor/Trustee relationship as a non-profit entity, acting for the benefit of its members. This is so in order to avoid certain local and federal regulations concerning limitations on corporate trustees (often only banks or title companies or self-owned corporations can be trustees of inter vivos trusts (i.e., which would create a merger of title in the land trust, contrary to its fundamental purpose and function)
because of its bond-ability to protect land trust participants in the event of financial loss of malfeasance in office
because trusteeship by an individual would likely entail handling by an inexperienced person who would most often not know the legal issues and regulations of the land trust concept and who would be most likely to “buckle under pressure” in the face of threatened litigation
because a corporate trustee can act independently as an unbiased intermediary relative to internal beneficiary disputes
because with a corporate trustee strict policies can be dictated and administered without the risk of personal favor or negligence in office
because we have direct access to and immediate rapport with the corporate decisions making officials
because the corporate trustee will provide high-level computerization of all bill paying and collections functions on behalf of co-beneficiaries
because opposing attorneys would be less likely to “attack” an institution with no assets than they would an individual or other entity with assets
because a corporation will be most likely to maintain up to date and accurate records of all aspects of the land trust transaction, including precise records of bill paying and disbursement records
because corporations are held to the highest legislative and accounting standards by the state and federal governments
because a corporation with a favorable history and a large trust fund balance is far more likely to be trusted by those entering the land trust transfer transaction
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, January 31, 2008
Thursday, January 24, 2008
THE EQUITY HOLLDING TRUST™ ANOTHER ANGLE ON THINGS
Bill j. Gatten
Despite what one might hear from those uninitiated in certain aspects of real estate acquisition, acquiring real estate with nothing out of pocket, without payments, management, maintenance, repairs or upkeep…and no credit risk…is a pretty darned good way to make a living. This is true even in geographical areas, such as the inner city, where the market is slipping or where appreciation "might" be perceived as sluggish.
When someone supposes there isn't as much appreciation in the inner cities, then I suppose that would mean that a house that sold for $25,000 twenty years ago would still be selling for $25,000. Obviously you and I know this isn't true. This is because houses there are made of the same lumber, concrete, cement, glass and Union labor and at the same costs as Valley and Seaside houses. As well, these areas are responsive to, and subject to, the same economic influences. Obviously in the ghettos or on Skid Row there should be some concern about values hanging stagnant for prolonged periods. But be that as it may, single-family housing values in the so-called inner cities rise and fall proportionately with the rest of the country just not with as great or as predictable a spread.
If you find yourself in an area where appreciation is dragging or has notoriously been minimal, then consider doing one of the following:
1. Move to another locale
2. Find properties in other areas
3. Establish partnerships with investors in other areas
4. Acquire with long term holding intentions
5. Look for profit centers other than appreciation (beginning equity, up front monies, and cash flow)
6. Acquire properties by a means in which you can sell income tax benefits along with use, occupancy, equity and quality asset protection (e.g., the NARS Equity Holding Trust™: The NEHTrust™)
The NEHTrust(tm) works this way:
A. A property is placed in a land trust for myriad reasons (here are just a few of them):
1. For privacy, estate planning, probate avoidance and assets protection
2. To enable one to convey all tax benefits to any party in the transaction that he/she would choose...without title transfer...in order to command 150% higher rents and eliminate all costs of vacancies, management, maintenance, etc.
3. To avoid Due on sale compromise in the underlying financing relative to owner financed subject-to's
4. To shield the property from virtually all legal threats and potentialities: from marital disputes and creditor judgments to BK's and tax liens
5. To make any payment-assumption simpler, safer and easier
6. To make your re-marketing easier, since the buyer can be so well protected while assuming payments on existing financing... without a Down (if you so choose) and without bank financing and stringent credit requirements
7. To make "sandwiching" easier, since the investor needn't be concerned about the potential for illegal actions by, or personal problems of, the person remaining on the loan…or of the person living in the property and making the payments
8. To make eviction faster and easier, since no defaulting party can not claim "Equity" to thwart eviction and force foreclosure
9. To shield the buyer against illegal or illicit foreclosure or unlawful detainer by the Settlor or Non-Resident Beneficiary without just and appropriate cause
10. To allow for the collection of as high a security deposit as you want without being restricted by legislation to just a "first and last"...a PACTrust(tm) Contingency Fund can hold one payment or twenty payments, if you want
11. To shield the investor from unfair and highly biased and restrictive Landlord/Tenant laws and regulations
B. NEXT, a Beneficiary Interest in the trust is assigned (to a remainder agent as successor beneficiary) is named by the owner...the Settlor Beneficiary)
C. THEN that Successor Beneficiary Leases the property from the land trust on "triple net" lease basis and contracts to pay all costs of ownership and possession.
D. FINALLY the investor beneficiary advertises for a resident beneficiary who will live in the property, take care of it and make all payments and handle all costs for 100% of all benefits of homeownership (including income tax deductions). Depending upon the amount of payment relative to FMV, the appreciation and principal reduction can be shared between resident and non-resident beneficiaries.
In this scenario, an Investor can relax and acquire more property, while expecting profit from a share in: 1) mortgage principal reduction 2) appreciation, 3) a return of all equity held at start, 4) a positive cash flow throughout the term, and 5) the passive tax write-off (depreciation) throughout the term.
At termination the resident Beneficiary either sells or refinances the property, and repays the investor his starting equity. The sale price for the property is whatever the FMV may be at termination, as may be determined by a mutually acceptable appraisal...LESS any monies owed by the trust to the acquiring parties (from profits, credits and refunds due).
That's about as concise as I can make it.
Call us if you need us. We provide all client consultation (we'll even sell the deal for you by teleconferencing with your clients and prospects); we guide you through every phase; we do all documentation, provide the trustee, the collection and disbursement service, client consultation, Escrow, legal review and endorsement, and post Escrow follow-up.
Bill Gatten
www.landtrust.net
bill@cal-equity.com
1 800 207 4273
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Despite what one might hear from those uninitiated in certain aspects of real estate acquisition, acquiring real estate with nothing out of pocket, without payments, management, maintenance, repairs or upkeep…and no credit risk…is a pretty darned good way to make a living. This is true even in geographical areas, such as the inner city, where the market is slipping or where appreciation "might" be perceived as sluggish.
When someone supposes there isn't as much appreciation in the inner cities, then I suppose that would mean that a house that sold for $25,000 twenty years ago would still be selling for $25,000. Obviously you and I know this isn't true. This is because houses there are made of the same lumber, concrete, cement, glass and Union labor and at the same costs as Valley and Seaside houses. As well, these areas are responsive to, and subject to, the same economic influences. Obviously in the ghettos or on Skid Row there should be some concern about values hanging stagnant for prolonged periods. But be that as it may, single-family housing values in the so-called inner cities rise and fall proportionately with the rest of the country just not with as great or as predictable a spread.
If you find yourself in an area where appreciation is dragging or has notoriously been minimal, then consider doing one of the following:
1. Move to another locale
2. Find properties in other areas
3. Establish partnerships with investors in other areas
4. Acquire with long term holding intentions
5. Look for profit centers other than appreciation (beginning equity, up front monies, and cash flow)
6. Acquire properties by a means in which you can sell income tax benefits along with use, occupancy, equity and quality asset protection (e.g., the NARS Equity Holding Trust™: The NEHTrust™)
The NEHTrust(tm) works this way:
A. A property is placed in a land trust for myriad reasons (here are just a few of them):
1. For privacy, estate planning, probate avoidance and assets protection
2. To enable one to convey all tax benefits to any party in the transaction that he/she would choose...without title transfer...in order to command 150% higher rents and eliminate all costs of vacancies, management, maintenance, etc.
3. To avoid Due on sale compromise in the underlying financing relative to owner financed subject-to's
4. To shield the property from virtually all legal threats and potentialities: from marital disputes and creditor judgments to BK's and tax liens
5. To make any payment-assumption simpler, safer and easier
6. To make your re-marketing easier, since the buyer can be so well protected while assuming payments on existing financing... without a Down (if you so choose) and without bank financing and stringent credit requirements
7. To make "sandwiching" easier, since the investor needn't be concerned about the potential for illegal actions by, or personal problems of, the person remaining on the loan…or of the person living in the property and making the payments
8. To make eviction faster and easier, since no defaulting party can not claim "Equity" to thwart eviction and force foreclosure
9. To shield the buyer against illegal or illicit foreclosure or unlawful detainer by the Settlor or Non-Resident Beneficiary without just and appropriate cause
10. To allow for the collection of as high a security deposit as you want without being restricted by legislation to just a "first and last"...a PACTrust(tm) Contingency Fund can hold one payment or twenty payments, if you want
11. To shield the investor from unfair and highly biased and restrictive Landlord/Tenant laws and regulations
B. NEXT, a Beneficiary Interest in the trust is assigned (to a remainder agent as successor beneficiary) is named by the owner...the Settlor Beneficiary)
C. THEN that Successor Beneficiary Leases the property from the land trust on "triple net" lease basis and contracts to pay all costs of ownership and possession.
D. FINALLY the investor beneficiary advertises for a resident beneficiary who will live in the property, take care of it and make all payments and handle all costs for 100% of all benefits of homeownership (including income tax deductions). Depending upon the amount of payment relative to FMV, the appreciation and principal reduction can be shared between resident and non-resident beneficiaries.
In this scenario, an Investor can relax and acquire more property, while expecting profit from a share in: 1) mortgage principal reduction 2) appreciation, 3) a return of all equity held at start, 4) a positive cash flow throughout the term, and 5) the passive tax write-off (depreciation) throughout the term.
At termination the resident Beneficiary either sells or refinances the property, and repays the investor his starting equity. The sale price for the property is whatever the FMV may be at termination, as may be determined by a mutually acceptable appraisal...LESS any monies owed by the trust to the acquiring parties (from profits, credits and refunds due).
That's about as concise as I can make it.
Call us if you need us. We provide all client consultation (we'll even sell the deal for you by teleconferencing with your clients and prospects); we guide you through every phase; we do all documentation, provide the trustee, the collection and disbursement service, client consultation, Escrow, legal review and endorsement, and post Escrow follow-up.
Bill Gatten
www.landtrust.net
bill@cal-equity.com
1 800 207 4273
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, January 17, 2008
TO BE RICH, SIMPLY STOP DOING WHAT POOR FOLKS DO
By Bill J. Gatten
I don't mean to sound maudlin or too "new-agey" here; but the one bit of magic that I have managed to glean from my more than half-century-plus on this wobbly little planet of ours (OK…four-fifths, then),.is that WE as individuals are absolutely in-charge. We are not only in charge of our own destinies, but also in charge of the very clockwork that is the Universe itself. Although most of us live our lives wholly oblivious to that fact, we are none-the-less in absolute control of our health, our fates, our bank accounts, and our aspirations, and those of others (…the world at large).
Think about it. Didn’t we (you and I together) send a man to the Moon and stand with him in awe as he took his first step? Didn’t we send space ships and video cameras to all the known planets? Didn’t we invent cures for Diphtheria, Polio and Malaria? Didn’t we build the Hubble Telescope and put it into orbit around a beautiful, inhabited water planet in a remote part of a remote galaxy, just because we wanted to? Didn’t we harness and tame the electricity that has enabled the Information Age in which we are now all basking? Of course we did! There is no one individual who can take credit for any of that…it was humanity that did it, and it will be humanity who travels to the stars and cures all diseases, and conquers aging one day. And that’s exactly who we are, and what we are capable of. As individuals, we need only to be in tune with all of it, and remain steadfastly aware of all of it, in order to use it and take credit for it. With each and every one of our achievements, somewhere along the line, a solitary individual with a burning desire to alter the entire Universe forever—with a little help from the rest of us—simply DID SO because they chose to, and because they knew for sure they could.
Here's my own little affirmation (as it were…a mantra?), which I have taped to the dashboard of my car, my bathroom mirror and on the back of my TV remote (with which I spend entirely too much time). It's yours too, if you want it. I have to say that it's done all right by me. But here’s the caveat: If you read it over once or twice and think you understand its meaning, you will be wrong…it’s far more multi-faceted than it appears to be at first glance:
I am perfectly in tune with, and solely in charge of, the Abundance of, and which is the Universe and all of Life: I will, therefore, continue to prosper and excel in the most spectacular of ways…always!
Dr. Tom Johnson
The core message here is simply that whatever it is that we choose to have, if we truly want it (need it or not), it will be given to us on a silver platter when we know for sure that it is our right to have it, and when we honestly ‘expect’ to have it. We can pray for it. We can hope for it. We can ask Santa for it. But if we’ve already tried all that, and are weary of all that mewling and moping and hoping; if we’re sick and tired of screwing around and waiting for the good stuff that others seem to have more of than we do: then we must dig in and holler. We have no choice but to tilt our heads way back and proclaim, from the diaphragm, as loudly and sternly as we can, that what we want is already ours and by damn, we’re going to have it…NOW! Its funny, but sometimes God doesn’t appear to hear too good when needs are whispered as supplications. But when they are boldly demanded with stern self-assurance, he smiles and says: ”Alright! You finally figured it out! It’s about time!”
When you have asserted your self in this manner (figuratively or literally)…and really mean it…my solemn promise is all that you honestly command into reality will indeed appear.
The most closely guarded secret relative to obtaining is not the fact that if you truly want it with a good reason, that it will be given to you. There’s a far more valuable tool that we need to understand. I can remember the “poverty days (my own)” of not too many years ago, when I thought repeating my mantras and my affirmations daily…with stern conviction…and paying larger tithes than I could afford, would bring me financial relief. It did not. It didn’t do diddly (so to speak) until I figured out the solution to the enigma.
The enigmatic mystery all along was simply that if you don’t think you deserve it, no matter how bad you want it, and no matter what you do to get it, you will not truly desire it (burningly) enough to demand it with every screaming fiber of your body and soul. And, until you do exactly that, your plans for achievement remain too undefined to allow the Law of the Universe to “know” what the heck it is that you’re supposed to have.
Consider you’re walking up to an airport ticket counter and saying, “I’d like a ticket please.” The ticket agent then asks, “Yes, and where would you like to go?” You reply, “Well…someplace better than where I am now.” Think about it…how far are you going to get before your realize that you’re going to have to refine your objective and know for sure exactly where you want to be. You also must know when you’re willing to leave and when you’d like to arrive, and what your surroundings should be like, once you get there/
The resolution of the “Mystery” then is: know what you want; brashly demand it without apology; know that it is already yours to have; expect it without embarrassment or doubt. Then, Voila! It’s on its way and you can’t stop it. Just be very careful what you pray for…because your gonna get it!
But wait! There’s still another catch. There are a few things you must to do first in order to get aboard the Achievement Train. These items are not necessarily daily exercises, or life-changing goofy stuff you can't live with for long, and which embarrasses your family when they see you doing it. But they are the ‘catch’ nonetheless, and are summed-up very succinctly in the following quote by Louise Hay:
In order to eliminate [any] ‘scarcity’ in one’s life, one must identify and relinquish some [veiled] self-serving need that relies upon that scarcity for its fulfillment
In analyzing this simple, life-altering truism, it become obvious that if, for example, one were to desire to, say, lose weight, he or she would have no choice but to give up something. For the weight challenged, take your choice: any two of the following will do (and you can keep all the rest)--those scrumptious high calorie foods; that insulin-spiking dietary starch; that satisfying couple’a cold beers every evening after work (Oh God! Please! Not the beer!); your sedentary lifestyle; or a blissful hour of not exercising every day.
Another prime example of a deeply hidden self-serving need that relies upon a scarcity for its existence is “Failure.” In other words: “If I don't attain any success, my need to bitch about everything and blame others for my failure won't be impinged upon, and I won’t ever have to face the prospect of…failing. If I don't try, no one can say I failed, and that way I won’t have to come back for an encore (…and that’s very important, because even if I did accidentally succeed once, who’s to say I could sustain my roll I was on, or ever do it again).”
For the same reasons, if one wants to lose the depleted bank account, and the monthly late notices (“friendly reminders”), then he or she has no choice but to firmly resolve to give up something. For starters, how about giving up, say, a couple hours of TV watching per evening, two or three of those leisurely Saturday afternoons per-month? How about giving up the safety inherent in declaring that you don't like cold-calling? Or perhaps letting go of that that fattening poverty- building, oh so soothing, propensity for procrastination;
As Dr. Wayne Dyer says in his educational course by the same name: You will SEE it when you BELIEVE it!
For our purposes, the key here is to simply understand, once and for all, that in order to become successful in creative real estate financing, especially as it pertains to the NARS Equity Holding Trust™, you do not have to change your lifestyle, your religion, your spouse, your girth or the way pluck your nose hairs. You merely need to identify and select a few of those replaceable Self-Serving Needs, resolving to abandon them in favor of diligently taking for yourself what you REALLY want out of life.
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
I don't mean to sound maudlin or too "new-agey" here; but the one bit of magic that I have managed to glean from my more than half-century-plus on this wobbly little planet of ours (OK…four-fifths, then),.is that WE as individuals are absolutely in-charge. We are not only in charge of our own destinies, but also in charge of the very clockwork that is the Universe itself. Although most of us live our lives wholly oblivious to that fact, we are none-the-less in absolute control of our health, our fates, our bank accounts, and our aspirations, and those of others (…the world at large).
Think about it. Didn’t we (you and I together) send a man to the Moon and stand with him in awe as he took his first step? Didn’t we send space ships and video cameras to all the known planets? Didn’t we invent cures for Diphtheria, Polio and Malaria? Didn’t we build the Hubble Telescope and put it into orbit around a beautiful, inhabited water planet in a remote part of a remote galaxy, just because we wanted to? Didn’t we harness and tame the electricity that has enabled the Information Age in which we are now all basking? Of course we did! There is no one individual who can take credit for any of that…it was humanity that did it, and it will be humanity who travels to the stars and cures all diseases, and conquers aging one day. And that’s exactly who we are, and what we are capable of. As individuals, we need only to be in tune with all of it, and remain steadfastly aware of all of it, in order to use it and take credit for it. With each and every one of our achievements, somewhere along the line, a solitary individual with a burning desire to alter the entire Universe forever—with a little help from the rest of us—simply DID SO because they chose to, and because they knew for sure they could.
Here's my own little affirmation (as it were…a mantra?), which I have taped to the dashboard of my car, my bathroom mirror and on the back of my TV remote (with which I spend entirely too much time). It's yours too, if you want it. I have to say that it's done all right by me. But here’s the caveat: If you read it over once or twice and think you understand its meaning, you will be wrong…it’s far more multi-faceted than it appears to be at first glance:
I am perfectly in tune with, and solely in charge of, the Abundance of, and which is the Universe and all of Life: I will, therefore, continue to prosper and excel in the most spectacular of ways…always!
Dr. Tom Johnson
The core message here is simply that whatever it is that we choose to have, if we truly want it (need it or not), it will be given to us on a silver platter when we know for sure that it is our right to have it, and when we honestly ‘expect’ to have it. We can pray for it. We can hope for it. We can ask Santa for it. But if we’ve already tried all that, and are weary of all that mewling and moping and hoping; if we’re sick and tired of screwing around and waiting for the good stuff that others seem to have more of than we do: then we must dig in and holler. We have no choice but to tilt our heads way back and proclaim, from the diaphragm, as loudly and sternly as we can, that what we want is already ours and by damn, we’re going to have it…NOW! Its funny, but sometimes God doesn’t appear to hear too good when needs are whispered as supplications. But when they are boldly demanded with stern self-assurance, he smiles and says: ”Alright! You finally figured it out! It’s about time!”
When you have asserted your self in this manner (figuratively or literally)…and really mean it…my solemn promise is all that you honestly command into reality will indeed appear.
The most closely guarded secret relative to obtaining is not the fact that if you truly want it with a good reason, that it will be given to you. There’s a far more valuable tool that we need to understand. I can remember the “poverty days (my own)” of not too many years ago, when I thought repeating my mantras and my affirmations daily…with stern conviction…and paying larger tithes than I could afford, would bring me financial relief. It did not. It didn’t do diddly (so to speak) until I figured out the solution to the enigma.
The enigmatic mystery all along was simply that if you don’t think you deserve it, no matter how bad you want it, and no matter what you do to get it, you will not truly desire it (burningly) enough to demand it with every screaming fiber of your body and soul. And, until you do exactly that, your plans for achievement remain too undefined to allow the Law of the Universe to “know” what the heck it is that you’re supposed to have.
Consider you’re walking up to an airport ticket counter and saying, “I’d like a ticket please.” The ticket agent then asks, “Yes, and where would you like to go?” You reply, “Well…someplace better than where I am now.” Think about it…how far are you going to get before your realize that you’re going to have to refine your objective and know for sure exactly where you want to be. You also must know when you’re willing to leave and when you’d like to arrive, and what your surroundings should be like, once you get there/
The resolution of the “Mystery” then is: know what you want; brashly demand it without apology; know that it is already yours to have; expect it without embarrassment or doubt. Then, Voila! It’s on its way and you can’t stop it. Just be very careful what you pray for…because your gonna get it!
But wait! There’s still another catch. There are a few things you must to do first in order to get aboard the Achievement Train. These items are not necessarily daily exercises, or life-changing goofy stuff you can't live with for long, and which embarrasses your family when they see you doing it. But they are the ‘catch’ nonetheless, and are summed-up very succinctly in the following quote by Louise Hay:
In order to eliminate [any] ‘scarcity’ in one’s life, one must identify and relinquish some [veiled] self-serving need that relies upon that scarcity for its fulfillment
In analyzing this simple, life-altering truism, it become obvious that if, for example, one were to desire to, say, lose weight, he or she would have no choice but to give up something. For the weight challenged, take your choice: any two of the following will do (and you can keep all the rest)--those scrumptious high calorie foods; that insulin-spiking dietary starch; that satisfying couple’a cold beers every evening after work (Oh God! Please! Not the beer!); your sedentary lifestyle; or a blissful hour of not exercising every day.
Another prime example of a deeply hidden self-serving need that relies upon a scarcity for its existence is “Failure.” In other words: “If I don't attain any success, my need to bitch about everything and blame others for my failure won't be impinged upon, and I won’t ever have to face the prospect of…failing. If I don't try, no one can say I failed, and that way I won’t have to come back for an encore (…and that’s very important, because even if I did accidentally succeed once, who’s to say I could sustain my roll I was on, or ever do it again).”
For the same reasons, if one wants to lose the depleted bank account, and the monthly late notices (“friendly reminders”), then he or she has no choice but to firmly resolve to give up something. For starters, how about giving up, say, a couple hours of TV watching per evening, two or three of those leisurely Saturday afternoons per-month? How about giving up the safety inherent in declaring that you don't like cold-calling? Or perhaps letting go of that that fattening poverty- building, oh so soothing, propensity for procrastination;
As Dr. Wayne Dyer says in his educational course by the same name: You will SEE it when you BELIEVE it!
For our purposes, the key here is to simply understand, once and for all, that in order to become successful in creative real estate financing, especially as it pertains to the NARS Equity Holding Trust™, you do not have to change your lifestyle, your religion, your spouse, your girth or the way pluck your nose hairs. You merely need to identify and select a few of those replaceable Self-Serving Needs, resolving to abandon them in favor of diligently taking for yourself what you REALLY want out of life.
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, January 10, 2008
Can We Make BIG Bucks on Over Encumbered Properties?
When everyone is running North that might be a good time to walk South and see what they left behind. A. Lincoln
At each of my workshops I ask the question: “How many here enjoy buying houses for more than they’re worth?” Seldom does a hand go up, but when the occasional one does it is usually withdrawn in haste once the question registers with the respondent. “Oh, you said ‘more’ than they’re worth? Never mind...”
But is there in fact a scenario where paying more for something than its worth could create a windfall profit later? What about having bought a few thousand shares of Amazon.Com or E-Bay ten years ago for more than its market price at the time? Might one have made money in that deal? Of course, but who knew?
In the above scenario, what if you, the purchaser, had as much confidence in the performance of the stock market over time as you likely have in that of the real estate market? And what if the seller was willing to pay you handsomely to take it off his hands, and what if you had someone standing by to cover all the costs of the purchase? And too, what if you knew with reasonable certainty that the value of your purchase would in time far exceed its price (over-encumbered or not), not to mention its current value?
Over the years I have sought out many properties that were worth less than their loan amounts by from $5,000 to $20,000 or more. Later on, when I began disposing of those “dogs” I managed to accumulate a small fortune from them.
A few examples:
Olive Dr., Riverside, Ca. was worth a maximum of $90,000 with two loans on it of $120,000 in 1987; sold this year for $235,000;
Hatillo St., Canoga Park, Ca. was worth $180,000 in 1988 with a loan on it of $185,000: sold in 2005 for $410,000;
Blythe St., Canoga Park, Ca. was worth $140,000 in 1989 with a loan on it of $155,000; sold in 2004 for $290,000,
Northstar Dr., Palmdale, Ca. was worth $110,000 in 2000 with two loans amounting to $125,000 which has been sold and is closing, as I write this article, for $335,000.
Muscupiabe Dr., San Bernardino Ca. was worth $225,000 in 1988 with a loan on it of $225,000 (needing $10,000 in work); sold in 2004 for $395,000.
In these examples, it was not luck and Appreciation alone that fed my profits: it was several other, too oft overlooked, profit sources: 1) up-front cash from the sellers, 2) up front cash from the buyers, 3) positive cash-flow (derived largely by being able to transfer tax benefits to a tenant-buyer), 4) equity build-up from the mortgage’s principal reduction, 5) bumped equity (i.e. starting price increased due to the credit and/or cash challenges of the acquiring parties), and 6) contingency fund-deposits retained when tenant-buyers default (note that all of my properties are held in 3rd party trustee, co-beneficiary Illinois-type land trusts, each of which require a contingency fund deposit that most often is left behind in the event of default (i.e., initially posted to protect the trust by covering missed payments, minor repairs, evictions, legal actions, etc.).
Note that in each of the examples, if there were to have been absolutely no Appreciation what-so-ever, I still would have done just fine given the additional profit sources mentioned.
Question:
Which of the following identical houses is less costly over the long-run; least expensive to get into; easiest credit, easiest qualifying…and which seller of the two is most likely to pay you to take the property (either up-front or by participating in monthly payments).
A) An over-encumbered 3+2 valued at $200,000 but with a $209,500 loan on it. Acquired seven years ago for $245,000 at 7% interest. Now has 23 years remaining on the original 30-year mortgage. It can be yours with only minimal, if any, credit, no down payment, $5,000 in closing costs and a safe payment take-over. Your payment is $1,385 P&I (note: loan is over-encumbered by $9,500, which amount will be neutralized in just a year or two (or less) with as little as $5,000 in appreciation coupled with an average mortgage principal reduction of, say, $165 or $175 per-month for a couple years).
Or…
B) An identical $200,000 house available with good credit, a 10% down payment, a new 6.5% mortgage loan, $5,000 in closing costs. Your loan payment is $1,137 P&I (and the loan has a $9,500 pre-payment penalty if retired sooner than 5 years)
Answer:
A) 23 yrs X $1,359/Mo. = $375,000 + $5,000 Clos. Costs = Total amortized cost of house “A” - $380,000
B) 30 yrs X $1,137/Mo. = $409,320 + $5,000 Clos. Costs + $20,000 Dn Pmt = $434,320) then add another $69,000 for lost Future Value of the down payment (at even 5% simple interest) = total amortized cost of house “B” - $503,000.
The Recipe: Find a highly motivated seller with a big problem; carefully analyze the profit sources (without anticipation of Appreciation); point out the estimated likely costs of short-sale, foreclosure, renting, leasing, any subject-to or equity sharing arrangement. Then compare the risks and downsides of these schemes (due-on-sale violation, susceptibility to lawsuits, creditor judgments, partition, charging orders and tax liens; also of prime consideration should be the inability to evict any errant tenant-buyer who holds “Equity,” as is the downside in virtually all creative financing, including lease optioning (except when the property is held in a 3rd party trustee, co-beneficiary land trust…my own transfer vehicle of choice).
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
At each of my workshops I ask the question: “How many here enjoy buying houses for more than they’re worth?” Seldom does a hand go up, but when the occasional one does it is usually withdrawn in haste once the question registers with the respondent. “Oh, you said ‘more’ than they’re worth? Never mind...”
But is there in fact a scenario where paying more for something than its worth could create a windfall profit later? What about having bought a few thousand shares of Amazon.Com or E-Bay ten years ago for more than its market price at the time? Might one have made money in that deal? Of course, but who knew?
In the above scenario, what if you, the purchaser, had as much confidence in the performance of the stock market over time as you likely have in that of the real estate market? And what if the seller was willing to pay you handsomely to take it off his hands, and what if you had someone standing by to cover all the costs of the purchase? And too, what if you knew with reasonable certainty that the value of your purchase would in time far exceed its price (over-encumbered or not), not to mention its current value?
Over the years I have sought out many properties that were worth less than their loan amounts by from $5,000 to $20,000 or more. Later on, when I began disposing of those “dogs” I managed to accumulate a small fortune from them.
A few examples:
Olive Dr., Riverside, Ca. was worth a maximum of $90,000 with two loans on it of $120,000 in 1987; sold this year for $235,000;
Hatillo St., Canoga Park, Ca. was worth $180,000 in 1988 with a loan on it of $185,000: sold in 2005 for $410,000;
Blythe St., Canoga Park, Ca. was worth $140,000 in 1989 with a loan on it of $155,000; sold in 2004 for $290,000,
Northstar Dr., Palmdale, Ca. was worth $110,000 in 2000 with two loans amounting to $125,000 which has been sold and is closing, as I write this article, for $335,000.
Muscupiabe Dr., San Bernardino Ca. was worth $225,000 in 1988 with a loan on it of $225,000 (needing $10,000 in work); sold in 2004 for $395,000.
In these examples, it was not luck and Appreciation alone that fed my profits: it was several other, too oft overlooked, profit sources: 1) up-front cash from the sellers, 2) up front cash from the buyers, 3) positive cash-flow (derived largely by being able to transfer tax benefits to a tenant-buyer), 4) equity build-up from the mortgage’s principal reduction, 5) bumped equity (i.e. starting price increased due to the credit and/or cash challenges of the acquiring parties), and 6) contingency fund-deposits retained when tenant-buyers default (note that all of my properties are held in 3rd party trustee, co-beneficiary Illinois-type land trusts, each of which require a contingency fund deposit that most often is left behind in the event of default (i.e., initially posted to protect the trust by covering missed payments, minor repairs, evictions, legal actions, etc.).
Note that in each of the examples, if there were to have been absolutely no Appreciation what-so-ever, I still would have done just fine given the additional profit sources mentioned.
Question:
Which of the following identical houses is less costly over the long-run; least expensive to get into; easiest credit, easiest qualifying…and which seller of the two is most likely to pay you to take the property (either up-front or by participating in monthly payments).
A) An over-encumbered 3+2 valued at $200,000 but with a $209,500 loan on it. Acquired seven years ago for $245,000 at 7% interest. Now has 23 years remaining on the original 30-year mortgage. It can be yours with only minimal, if any, credit, no down payment, $5,000 in closing costs and a safe payment take-over. Your payment is $1,385 P&I (note: loan is over-encumbered by $9,500, which amount will be neutralized in just a year or two (or less) with as little as $5,000 in appreciation coupled with an average mortgage principal reduction of, say, $165 or $175 per-month for a couple years).
Or…
B) An identical $200,000 house available with good credit, a 10% down payment, a new 6.5% mortgage loan, $5,000 in closing costs. Your loan payment is $1,137 P&I (and the loan has a $9,500 pre-payment penalty if retired sooner than 5 years)
Answer:
A) 23 yrs X $1,359/Mo. = $375,000 + $5,000 Clos. Costs = Total amortized cost of house “A” - $380,000
B) 30 yrs X $1,137/Mo. = $409,320 + $5,000 Clos. Costs + $20,000 Dn Pmt = $434,320) then add another $69,000 for lost Future Value of the down payment (at even 5% simple interest) = total amortized cost of house “B” - $503,000.
The Recipe: Find a highly motivated seller with a big problem; carefully analyze the profit sources (without anticipation of Appreciation); point out the estimated likely costs of short-sale, foreclosure, renting, leasing, any subject-to or equity sharing arrangement. Then compare the risks and downsides of these schemes (due-on-sale violation, susceptibility to lawsuits, creditor judgments, partition, charging orders and tax liens; also of prime consideration should be the inability to evict any errant tenant-buyer who holds “Equity,” as is the downside in virtually all creative financing, including lease optioning (except when the property is held in a 3rd party trustee, co-beneficiary land trust…my own transfer vehicle of choice).
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, January 3, 2008
Scenario
I received a call from my partner’s bandit sign (I Buy Houses, Full Price, All Cash or Terms any condition, any price)
I spoke with a Mr. Sam Brown who said he had a house worth maybe $150,000 with $154,000 loan on it. I asked him “what he would like to see happen.” He said he was just looking for someone who would take over his payments. I then asked how much work needed to be done. He said maybe $10,000 worth.
Next, I asked how far in arrears his payments were. He indicated that they were current…for the moment. I then asked what he would do if I were not able to help him. His comment was that he just wanted to walk away, and that he had no cash and would not be making any further payments, regardless of whether I took the house or not.
I told him I'd call him back the next day after checking the title and getting some comparable value information together (comps).
The comparable sale in the area showed the property to be worth perhaps $155K to 160K after fix-up (still no equity for me).
I then calledMr. Brown the next day and arranged to meet him at the property.
After seeing the mess (broken windows, a yard full of trash, weeds up to the windows, windows frames that didn’t meet the walls, peeling linoleum on the floors, dry-rot and termites), I commented to Mr. Brown that I could see that he was really in a pickle on this one...he agreed and reiterated that he had no money and had no choice but to let it go back to the bank if I didn’t want it.
After inspecting the house, I determined that actual refurbishment to a reasonable cosmetic condition (with good but cheap labor) might run no more than $6,000 to $7,000. I reasoned, as well, that by keeping the loan in place and asking for $10,000 up front from a resident beneficiary on a 50:50 equity share, I could get all the work done. I figured I could advertise it at $165,000 and perhaps be able to start out at break even (without cash out of pocket).
I then had Mr. Brown sign a 15 days option (tried for thirty, but he was afraid of having to make another payment). Upon handing him the option to sign (with a dollar bill stapled to the front), I also gave him an unsigned copy of the Purchase Offer (Appendix #1 of the 10-Step Process of Documentation Manual), explaining that the dollar was just legal consideration (‘stops them from asking for an option fee).
I next beat it to the county court house and recorded the Memorandum of Option, then over to the newspaper office to run my ad:
NO BANK QUAL
NO DOWN
NO CRED. APP
3 Pmts and Clos Costs
Moves you in. $165K 3+2
Needs TLC. xxx xxx xxxx
I next had my friend “Bob” put a coat of gray paint on the front of the house and had him frame all the window and door openings with 1X6 boards. He then painted all the trim a nice bright white. We then took all the trash that was in the front yard and threw it in the back yard. Next, we Roto-Tilled the front yard and planted some flowering plants along the front of the house. After two or three hundred dollars at most, the house looked quite “cute” from the street. The plan was to THEN start work on the rest of the house, in hopes that someone might drop by and offer to do the rest of the work for a reduction in price.
After the front of the house was cleaned up the ad calls started coming in. One after the other I repleated the same mantra:
I have the little property over there on Xxxx Street and if you can afford the 9 or 10 thousand that it’ll take to get and the 1,200 or so in monthly payment after you ad the tax and insurance, I’ll just give it to you. The only thing I want out of it is to
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
I received a call from my partner’s bandit sign (I Buy Houses, Full Price, All Cash or Terms any condition, any price)
I spoke with a Mr. Sam Brown who said he had a house worth maybe $150,000 with $154,000 loan on it. I asked him “what he would like to see happen.” He said he was just looking for someone who would take over his payments. I then asked how much work needed to be done. He said maybe $10,000 worth.
Next, I asked how far in arrears his payments were. He indicated that they were current…for the moment. I then asked what he would do if I were not able to help him. His comment was that he just wanted to walk away, and that he had no cash and would not be making any further payments, regardless of whether I took the house or not.
I told him I'd call him back the next day after checking the title and getting some comparable value information together (comps).
The comparable sale in the area showed the property to be worth perhaps $155K to 160K after fix-up (still no equity for me).
I then calledMr. Brown the next day and arranged to meet him at the property.
After seeing the mess (broken windows, a yard full of trash, weeds up to the windows, windows frames that didn’t meet the walls, peeling linoleum on the floors, dry-rot and termites), I commented to Mr. Brown that I could see that he was really in a pickle on this one...he agreed and reiterated that he had no money and had no choice but to let it go back to the bank if I didn’t want it.
After inspecting the house, I determined that actual refurbishment to a reasonable cosmetic condition (with good but cheap labor) might run no more than $6,000 to $7,000. I reasoned, as well, that by keeping the loan in place and asking for $10,000 up front from a resident beneficiary on a 50:50 equity share, I could get all the work done. I figured I could advertise it at $165,000 and perhaps be able to start out at break even (without cash out of pocket).
I then had Mr. Brown sign a 15 days option (tried for thirty, but he was afraid of having to make another payment). Upon handing him the option to sign (with a dollar bill stapled to the front), I also gave him an unsigned copy of the Purchase Offer (Appendix #1 of the 10-Step Process of Documentation Manual), explaining that the dollar was just legal consideration (‘stops them from asking for an option fee).
I next beat it to the county court house and recorded the Memorandum of Option, then over to the newspaper office to run my ad:
NO BANK QUAL
NO DOWN
NO CRED. APP
3 Pmts and Clos Costs
Moves you in. $165K 3+2
Needs TLC. xxx xxx xxxx
I next had my friend “Bob” put a coat of gray paint on the front of the house and had him frame all the window and door openings with 1X6 boards. He then painted all the trim a nice bright white. We then took all the trash that was in the front yard and threw it in the back yard. Next, we Roto-Tilled the front yard and planted some flowering plants along the front of the house. After two or three hundred dollars at most, the house looked quite “cute” from the street. The plan was to THEN start work on the rest of the house, in hopes that someone might drop by and offer to do the rest of the work for a reduction in price.
After the front of the house was cleaned up the ad calls started coming in. One after the other I repleated the same mantra:
I have the little property over there on Xxxx Street and if you can afford the 9 or 10 thousand that it’ll take to get and the 1,200 or so in monthly payment after you ad the tax and insurance, I’ll just give it to you. The only thing I want out of it is to
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
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