All Forum Posts by: Chris C.

Excellent post Bill. lol.

My post are quite possibly coming off as a bit paranoid. I apologize for that.
What does everyone else think. Hopefully we can keep this from becoming a political discussion.

Thanks Steve, I didn't want to give the impression I was spamming my original post.

I have been involved in an excellent discussion about the Safe Act. The question is what type of liabilities or you opening yourself up to by discussing the Safe Act on BP. With it being so vague and implemented in such varied ways any investors compliance could be called in to question. Below is an excellent question posed to me by Financexaminer and my response. What is your opinion of liabilities or if your brave enough lets talk about how the Safe Act effects what we are doing and our compliance questions.

I do not have any personal references but contact the Upstate CREIA Group. They are very helpful and friendly group.
http://upstatecreia.com/contact_us.htm

In my reading of the Safe Act Eric is correct. However it is up to each states interpretation and enforcement. In South Carolina a "natural person" can have up 5 loans. Of course the law goes on to say that it could change if HUD rules that not to be in compliance with the Safe Act. So I can provide loans outside of any entity but if HUD rules SC law not in compliance it will be illegal for me to continue to manage those loans. Thanks for the help government.

All cities and towns close to me have banned mobile homes from being moved into the city limits. Existing homes are exempted. Make sure there isn't anyone on the local council pushing for this type of law or that it hasn't already happened and the owner is trying to dump the park before the word gets out.

Also don't make the mistake I did with right of ways. I bought a small 2 acre park with 4 lots. One was empty. Found out that it was empty after I purchased the park because while it was vacant a new power line was ran above the lot. Now a home can not be placed under the power line. Made a good deal just ok.

Wow! With these responses I feel like I owe somebody some money. Thanks for the response guys especially your incredibly detailed and educational response Finance. I have bought property on a CFD but after reading your explanation of how it should be structured it reinforces the fact I intend to never use that lawyer again.

So using my new found knowledge here is the time line of how I propose this to be structured:
I use cash to Purchase, Rehab, Marketing etc Total 35k
I then finance 35k against the property. Property Value 70K. Loan would be same as if applying for rental home. I market and sell the property using CFD with terms as stated in my first post. The buyer is aware of the 1st lien but is also given a lien against the property. Plenty of equity there to cover 1st lien and his position. Everything is structured exactly as Finance states.
This gives me my cash back for next deal plus monthly income less the loan payment. If I decide to sell the CFD then part of the note sale will be satisfaction of the first lien and otherwise structured as described by Finance.

Viable Business Model?
Any other foreseeable issues with this?

P.S.
I do intend to run all this past a good lawyer who has experience with CFD. I just want to make sure that I have a good understanding before I have that conversation. Also this is some great info to be shared with others on BP.

Thanks for the response Finance.
Please be patient if I missed your point. I dont quite follow.
I understand that a note can stand on its own as a security. With a default you forclose on the property.
I dont see how a CFD could stand on its own. If I only sold the CFD then the CFD purchaser would have no way to complete the transaction since he does not have the Deed to the property to transfer to the occupant. I would still have it. I assumed that when purchasing the CFD you would be buying the property and assuming my position in the CFD. Is this correct or is it possible to sell the CFD on its own?
All this is also based off my assumption that the property is being leased until the satisfaction of the contract. The occupint of the property does not have equity in the property until he has successfully satisfied the contract. He is merely leasing until this point. Is this also correct?
The contract I have used in the past specifically state that in cause of failure to comply with the contract then it will be considered a lease and eviction proceedings will be used. It does also include the note terms.

In summary can I sell a CFD and is there a market for it?

Theoretical deal:
3/2 in South Carolina
I purchase this property, rehab, and resale with contract for Deed. Buyer puts down 5k and sign contract for deed of 65k. Comps support value of 70k. Nice working class neighborhood etc.

What is the interest for note buyers or others to buy this property. (I know the purchase would be at some discount to the remaining balance of the contract.)

Contract buyer would be actually buying home and assuming my position in the contract for deed. I see numerous benefits to this but also buyer would be closing on entire home and not just the note.

I would like to do contract for deed as opposed to straight owner financing so that I can refinance after the rehab to pull my money out to move on to next project but would also like the option to sell the contract to pull my profit after it is seasoned.

What are opinions on this and what are viable ways to accomplish this.

Here is the deal:
1.33 Acre lot very close to large university. Has 1990 3br 2bth double wide mobile home included with purchase that is currently rented for $650 (Have not ran comps for the area). Has additional 2000 3br 2bth mobile home that pays lot rent of $100. (Low for the area and should probably be closer to $150).
Purchase price would be at most 40k (Asking 45k but already said he would take 40k)
Using 50% rule: (If I am using it correctly)

$40,000 - 20% dwn = $32000

$32000 @ 5% for 30 yrs = $171.78 Payment

$750/2=$375

$350 - $171.78 = $203.22 profit

Taxes are $600 a year but I assume those are part of the 50%.
Occupants split water cost from single tap and are responsible for their own lawn maintenance.

The only future concerns I have right now is that the property is very close to 2 town limits. If either town annexes this property then I will not be able to move new mobile homes in to replace one if needed. Both towns do not allow mobile homes to be moved into the city limits. Its location is nice but I do not know what I would do with it if I could not put more mobile homes on it. Build duplexes or other multi-family but really don't want to go there. However I do expect the property to appreciate fairly well due to its proximity to the college and the growth in this area.

Is this a deal most of you would consider or would you wait for a better one? Seems like a good return to me but that leads to another question. I currently purchase vehicle notes at 18% interest. I am also selling mobile homes that generate, after mark up and financing, a considerably better return then that. The car notes are easily replaced but I have to work to keep the mobile home deals coming. The approximately $10k for down payment and closing cost I use for this deal will take away from the car notes and mobile home deals. In a comparison of the returns is the land/home deal worth considering?
I hope this wasn't to lengthy and really appreciate any feedback.

PS...What are banks saying about lending on a deal like this. I have a 750+ credit score.