All Forum Posts by: Justin Hammond

@Cheyenne Nafe I think an assignment would work. If, for some reason, the contract assignment doesn't work you could ask Buyer #1 about their purchasing entity. If their entity is just some single purpose LLC, then Buyer #2 could just take over that LLC. This would of course require cooperation of Buyer 1 and Buyer 2 may want to compensate them for that, so this option is mainly there if the negative consequences of drafting a new agreement outweigh the consequences of compensating buyer 1.

It's my guess, though, that the contract can be assigned. The only thing I can see getting in the way of this would be if the Probate court needs to make sure the transaction is arms length, requiring them to investigate the buyer. I'm not sure if they do this, but if they do then it might kill the assignment.

@Kameron Grady, Yes I have done this. The mortgage doesn't necessarily need to be paid off. You can do what is called a "wrap" mortgage, or an "All Inclusive Trust Deed". I have been on both sides of these and they work fine.

You don't need the bank to be ok with it. You do, however, run the risk of the "due on sale" clause contained in most mortgages. This clause just says the lender has the RIGHT to call the loan due in the event of a title transfer. It doesn't say they need to be notified, it doesn't say the loan IS due.... Just that they have the right. 

I have triggered the due on sale clause probably 150-200 times and I've never had a loan called due. that doesn't mean it's not a risk, but it's a risk I'm ok with on most deals.

@Joe Matthews Pretend you don't have $50k. Decide what deals excite you the most. Start doing those deals without the 50k (i.e, borrowing money or getting investor partners). Treat your own 50k like it belongs to the most expensive hard money lender on the block. Worst case, you use it.

But if you aren't going to succeed in doing deals without 50k, then the savings you have won't get you very far. You'll buy a rental or two and then you're back in the rat race of saving money so you can buy a rental. 

Get used to using your brain and hustle to generate assets, not your cash (yet).

"the #1 killer of investment returns is a fat wallet." -Warren Buffett

@Mark Pettie, I built a portfolio of about 55 subject to rentals, and have done probably another hundred or so that I flipped. I sold a bunch of properties over the last year, but still have about 25-30 subject to's in my portfolio. Each one with a fun and unique story :) feel free to pm me, I'd be happy to chat about creative finance and share some things that have worked for me. 

@Cheri H. The fees seem reasonable but most hard money guys I know don’t charge for appraisal or inspection (unless there are construction draws). But either way, you aren’t paying too much for hard money.

@Account Closed I was just looking at selling to myself too! For those of you that think it's the same as a refi... it's not when you consider the tax free capital gains from living in the property 2/5 years. Selling to yourself gives you a step-up in basis without paying tax. I understand you don't pay tax on HELOC funds or refi proceeds, but you would if you eventually sold it. What Whit is trying to do is avoid that.

This is not illegal. I don't know why that word is thrown around so much.

From talking with my accountants about it, however, the transaction does have to be arms length in order for your gains to remain tax free in the event of an audit.

We batted some other ideas back and forth.. What if I sold it to my buddy's LLC and and then he sold it back to my LLC (a different one) for the same price in a couple months? Not a bad idea.. You may get audited and the IRS may call a foul and hit you with a claim for the capital gains.

Either way it's a really good idea to take advantage of the tax free capital gain. So selling is probably the best bet, whether you sell to yourself or not. Just my $0.02. Good luck Whit

@Lionel Mosby Jr, I may be able to help. I have done well over 100 of them and still own about 30 of them as rentals. Let me know if I can answer any questions!

@Ramesh Ramdatt also curious if you ended up doing the strategy?

@DeAnn Dillard , I would find a partner to put up the $125k. Assuming your hard money terms are about 2.5% origination and 12% interest, your hard money costs will be $90k for a year. That will leave you with a $60,000 profit if the deal goes smoothly. If you split the deal with the partner who puts up $125k, you'll each make $30k and your partner will make 24% return if it takes a year. 

Edit: That's assuming your hard money lender will allow the interest to accrue and be paid out at the end. If you need payments to be made, your partner will need to come up with more cash which will dilute the returns

@Jared Hockensmith Why wouldn't you be able to get hard money? It's probably a good idea to get the property under contract before exploring all these options. Once you have a solid contract you will have some avenues open up. Do you feel like you have enough experience to get an offer accepted? If not, PM me and I can help

@Davi A. if the seller insists on some protection, I would structure it as a "wrap" mortgage, or an "All Inclusive Trust Deed". That will at least convey the title to you, and will create a new lien between you and the seller which is wrapped around the underlying loan. That way if you miss payments, he can foreclose. 

Just like @Wayne Brooks, I wouldn't do a deal on a contract for deed UNLESS your out of pocket was very minimal and you were looking at it as more of an option premium than a down payment.