All Forum Posts by: Philip Klinck

If the lender likes the new asset as well or better than the one I am selling they can move their security for the note I pay to the new asset. Or they can convert their note to equity in the new asset and we can be partners. It all depends on what I want to do and they want to do. 

A transaction I have not closed on yet but is in process. 

I am helping someone sell 2 mobile homes. They want 100k, based on 2 months on the market is too high. We have had offers at 70k. They settled at taking $80k if we could get it. We had many owner finance offers. One in particular had a large down payment of $20,000, finance $80k at 9.99% at $800 a month with a 5 year balloon. We can discount the $80k note to $60k to get the seller the $80k they settled on (20k down plus 60k.) I am not going to just sell off the note. I am borrowing the $60k that is needed to buy the note from an IRA holder at 12% interest only. That means my payment to the IRA is $600 a month. And the payment I get from the $80k note is $800 a month ($200 mo. cashflow to me.) I owe the IRA $60k in 5 years, and the $80k note owes me $69,626.17 in 5 years.

I can hold until the end. Or I can wait for the $80k note to get seasoned and sell to an institution for a slight discount. Or I can trade the $80k note into another deal and bring my $60k lender with me. I have many options once I have the note. 

A simple transaction:

We had a house for sale seller finance. A guy came to us and said I don't have the cash for a down payment but I do own a lot. We took the lot as a down payment and financed the house to him. 

Another example:

We bought a house subject-to the debt, paid back payments plus let the owner live there for 5 more months. We had $15,000 of cash in the deal. It needed another $60k to rehab. The profit potential was around $70,000 cash. Instead of investing $60k more, waiting on the rehab, waiting on the sale, and worrying about the market changing in 6 months, we exchanged our position in the deal for a $50k 1st position note on a $100k house at 8.75% over 15 years at $500 a month. So essentially we bought a $50k note for $15k. The benefit to us is that we did not have to wait and we lowered our risk. The benefit to the note holder is that they cashed out their note a par. 

This transaction was only possible because we did not need the cash. However we could borrow against our note or sell it at a discount to raise cash. We can also use it as a down payment. 

In exchanging everything is money. It just comes in different forms with different durations. 

These types of transactions happen on wall st all the time. They are just not something most people in Real Estate use. 

Example of an exchange I helped the OP with. 

He built many brand new homes in a lakefront community but the larger more expensive ones were not selling as fast. The OP wanted to sell and move on to the next project. I found a 24 pad townhouse project that was already platted out. The seller of the townhouse project wanted to get cash. The house had more potential cash buyers and the OP would have a new project to work on. So they exchanged as an even swap. The transaction was not about the numbers it was more about the benefits to each party. The Townhouse project owner would have more potential cash buyers. The OP would have a new project with much more upside potential. 

Investment Info:

Single-family residence note investment investment in Greenville.

Purchase price: $62,500
Sale price: $62,500

I have a 30 year note that balloons in 7 at a rate of 7% I would trade for a property or use as a down payment.

Closing costs are fairly inexpensive. The basis issue isnt there because its an IRA who has beneficial interest in Land Trusts that own the properties.

I just cant figure out how to hold constant the amount that the seller of the $50k house will receive. 

So I want to buy a house by giving an option against another house. If I dont know what the exact selling price is how can I be sure what to write the option up for? 

Example:

Purchasing a house for $50k with an option against a house I currently own worth around $130k. 

The way I understand options is that I could give the seller of the $50k house an option to buy my house for $80k and when it sold they would get $50k. But, what if it sells for $125k or $135k? Then the seller of the $50k house will either get underpaid or overpaid. I want it to be exactly $50k and I dont know when the house is going to sell or for exactly what price. 

I realize I could give them a 1st mortgage but Id rather keep things simple and just write up a contract that gets recorded. 

I have the attorney setting up a sub2 purchase. They are making a trust called "previous owners name" so the deed will transfer into that trust with myself as the beneficiary. But, they said it will flag the mortgage holder when the taxes and insurance change into my name. I said, "can you not just put those into the name of the trust as well?" I have not gotten an answer back but what am I missing here? How do you setup your SUB2 deals?

Yeah, I think the high-end is 119,000-125k but Im going with 109k to be sure. But, its about 8500 more than I would like to pay. I just figure since there is little to no repairs to be done it could be worth paying a little more.