All Forum Posts by: Grant Kemp

Welcome to the world of RE investing! There's a ton of information on here and DFW houses some great knowledge bases. Don't be afraid to contact people you find on here, every DFW investor I've talked to from this site has been extremely nice and helpful!

also, any insurance company should be able to handle this, just make sure you've given them instructions on what's needed and that you follow up to make sure it was done right.

@bill gulley is right, that's the caveat I was referring to earlier. The transfer must be for estate planning in order for Garn-St. Germain to be effective, which a wrap typically isn't. But since that act exists it just serves as another road block between the wrap and due on sale clause.

@Kyle Hipp is right, it's all about proper disclosures, and making sure every party understands all the associated risks before signing.

@Account Closed we've done over 10,000 wraps in my office over the past 25 years and only had the due on sale clause called 3 times. All of which were able to be resolved through deeding the property back to the seller then into a trust. Due to the Garn-St. Germain act, a property deeded into a trust doesn't violate DOS (although there are some caveats to that)

@Rav Ram the insurance is pretty easy, just make sure your original seller is listed as either the "insured" or "co-insured"/"also-insured" party. You'll need to have the original mortgagee (the bank) listed as the mortgagee, but put your company's name as the "secondary mortgagee" clause. If you need help please let me know, I'm here in DFW and I purchase/sell 5-15 of these a month for my own portfolio and I also process an additional 30+ each month for other investors around town.

@Jerry Puckett thanks for tagging me, I would've missed this thread!

@Account Closed this may be a silly question, but do you have contacts inside of the bank for those types of listings? We've got the money and willingness but getting the list seems to be the tricky part.

I can respect that. It really does just boil down to personal preference of if you view it as worth the work or not.

I should note, this is a very bare bones deal. Most sub2 wraps have much more meat on the bone, but the whole point here is to turn a nothing into a something and this is the only way I know of to turn trash leads into money.

also I should note that yes, throwing out that 60k number assumed they stayed in the home and paid on it for the entire 20 years. Your profits are greatly reduced if they refi out or sell the property.

Either way, whatever money you made up to that point is still an infinite percent roi due to the lack of invested dollars.

lol @Ellis San Jose I don't get on here anymore enough to know what "being gullied" is. Does mr. Guilley have a habit of blowing up on people or something?

And yeah time value does matter a but here but let's not forget ANY money is more than no money. Especially on a deal that takes none of your money to put together, any money you get is a pretty darn good return.

Shoot give me 20 properties that are just like this and I'll take that $400/mo cash flow. Responsibilities are next to nothing and even if you do get called to do something you'll just end up making more money.

"She can certainly sell it with cash down and do a Sub-2 and carry it, have the deal serviced so she doesn't have the problems, but it needs to be short term, 3 years, try not to go beyond 5 years, certainly 7 years. Qualify your buyer."

also, how is this viable to you, but it's all of a sudden wrong when you step in the middle and do a wrap. This is a genuine question, and please don't take it as combative.

holy cow! sorry to have gotten you so worked up here.

Ok, let me try to address these things one by one. I hate how heated people get on things without realizing that even though it's not the way you've done things in the past, that it can still work. I realize I may have put one too many exclamation marks in my last comment? perhaps that's where I became a "guru"...anyway:

"Buyers need to be able to refi the deal as soon as possible, doing a really stupid thing of jacking up a sale price means it won't appraise out." you're right in that it wouldn't appraise out if sold for zero down, but typically an owner financed transaction is going to have a very large down payment, in this case 15,000 which would get the house back to an obviously "financable" amount since we're matching the principal value up. I don't recommend going 120% of retail market value pretty much ever, but what I said was that the houses can sell for that much when owner financed. I've seen it happen plenty and MOST of the time (ie close to 90%) the buyer prefers to continue paying their wrap mortgage rather than refi. We even offer refinancing to our buyers and most opt just to continue as is. In fact, I've not sold a house for over market by that much. The most I've gone is 110% and this was due to underlying lien amounts needing to match. Again, it's all about disclosure and making sure everyone entering into the agreement understands what's happening to the T. And to say that having built in financing doesn't add value is a matter of semantics at best. It is valuable to a buyer to have financing available to them when it may not otherwise be available. When buyers are a higher credit risk, they pay more. This is traditionally reflected by interest rates, and in this case it can be reflected by a higher purchase price.

Always keep in mind that the ability to repay MUST be considered. and this is where using an RMLO comes in to play. You've got to stay compliant with Dodd-Frank, SAFE, RESPA, TIL, and all the other acts that deal with financing to a consumer.

as far as the sub2 and end buyer problems you mention, there's not as much validity there as would seem by your comment. I'll mention the question of the seller filing bankruptcy to Scott just because I've never had to deal with that scenario. However, buyers or sellers dying would not be an issue any more than in a traditional sale with a traditional mortgage, either way it gets passed to the estate. And the "lots of things can happen" side of things is also not as "lots" as you may imagine. We've closed approximately 10,000 owner financed transactions over the last 25 years and only seen the due on sale called 5 times, 3 of which were due to non payment by the investor. This is one reason we always use a third party loan servicer for these notes.

I'm not sure what got you so upset about my mentioning the note so you're not hit by the double closing laws? That wasn't the topic of our discussion so I didn't go into it, but if you need money from the "C" closing to fund the "A" closing (in this case a 15k down payment) you can create a promissory note to "A" backed by a DT for that 15k and make it payable within a week (or any other short term) with no prepayment penalty, then when "C" funds, use thatmoney to fund "A" and it pays off your note. This satisfies the full consideration requirements of the A to B transaction and allows you to use the B to C money to do it.

Also I'm not sure where this big hangup on people dying comes from. For one, at least from the investor side, we always purchase and sell through the LLC, and secondly death of an entity doesn't just wipe out a mortgage. In the case the investor died, that mortgage owed would be passed on to heirs if it was done under their personal name, and if not the company would still be getting paid their mortgage.

Default on the wrap note does NOT mean you have to pay off the underlying lien entirely. Perhaps you thought I meant default to the UL? The reason we structure our deals with the investor in the middle is so that we can be there to continue paying the UL even if our buyer stops paying. However, even with that being said we have disclosures upon disclosures making sure that the seller understands that it is their name on the note at the end of the day, and worst case scenario occurs that means the debt is their responsibility. Almost all of the sellers we have are one step away from giving their house back to the bank anyway, so their worst case scenario means they just end up right where they started. Best case scenario, they don't have the hit to their credit that a foreclosure or short sale would and someone else gets to have a home. Anyway, if the buyer stops paying, you can continue to pay the UL while foreclosing on the buyer. The note and DT is signed to you as the investor, this is why you're able to foreclose on the buyer.

"Now, I do most investors like to stick it to buyers while smiling perhaps saying a prayer with them as you have them sign and do their best to tell themselves they are honest dealers," I find this to be the most ironic line of the whole thing. I can confidently say that I NEVER try to pull one on anyone, seller, buyer or otherwise. The world goes round through disclosure, and doing anything other than telling the whole truth to everyone right up front is just dishonest and wrong. This comment made me cringe a little to see you endorsing this kind of behavior while talking about what a bad person I am here haha

either way, like I said, I'm pulling from 25+ years of experience and 10,000+ closings here. Scott's a title and real estate attorney and we've seen this stuff work. We close anywhere from 5-15 properties a month, and while I won't say you never can run into a problem I will say show me what real estate strategy NEVER has an issue arise. Everything done here is entirely legal and proven.

I apologize to all on the forum having to read such dramatic posts, really seems to be counter productive but I guess at the end of the day it's good for questions and issues to be addressed.