All Forum Posts by: Robert Carpenter

Following on Liz's point that Dodd is confined to house sales - house purchases are exempt - its my understanding that sales to entities are likewise exempt. As long as you sell a house to an LLC rather than an individual are you not exempt from Dodd ?

@Joseph Weisenbloom  I believe what you're talking about is the Garn St Germain ruling whereby transferring a house to a trust cannot trigger 'due on sale', as long as the so-called 'beneficial interest' of the trust is still the original owner.  On the other hand I believe, and maybe the legal scholars can weigh in, deeding the house to a trust the beneficiary of which is a new owner still can but need not trigger 'due on sale'.  

@Robert Dean

The elemental and fundamental rule of real estate investing is:

NEVER USE YOUR OWN MONEY OR YOUR OWN CREDIT

NEVER PERSONALLY GUARANTEE DEBT

In theory the name of the trustee administering the land trust should be the name on file at the county recorders office.  The name can be an individual or an entity.  Either way you'll have to contact them and explain that you're interested in buying the house.  It is at the discretion of the trustee whether to pass your information on to  the trust's beneficiary, the person who actually owns the property.   Now if all of this rigmarole leads you to believe that a land trust is a device to mask the identity of the property owner that is exactly the intention of land trusts.  Finally the very fact that the property is sitting in a land trust tends to suggest that it may already belong to a real estate investor but not necessarily. 

Will be there and plus one if possible :)

I want to thank all of gentlemen for taking time to answer my question so lucidly, so personally, so thoroughly.  I knew biggerpockets had a reputation for quick, useful, and detailed answers to submitted questions but the answers given back on this question exceed all  I may have dared  expect.   Ellis your response in particular expands beyond mere prose   wandering perilously close to the realm of literature, something one might have expected to read in a short story or essay :)   You are surely right in the observation that the fairness of the terms of a deal is always shaped and conditioned by whichever  side of the table one is sitting on.  Again thank you all for giving me a much deeper appreciation for the subtitles involved in the question.  The takeaway I get is that either party can make offers which the other party can accept or decline.   

Thanks for your information Ellis and Jeff

And Jeff I would NOT have expected private money lenders to demand a personal guarantee from the borrower because a private money lender supposedly makes his entire decision to fund a loan based on the deal itself. He is guided by an LTV, he demands first position on the title, he gets involved only to the extent that he feels he is protected by the assets within the deal itself. He is indifferent to the credit worthiness of the borrower, his credit score, his assets etc. I would never have expected private money lenders to try to recover their investment by coming after the private assets of the borrower.

Suppose you borrow private money for a deal and the deal goes bust. Now with a bank mortgage there in normally a 'deficiency clause' allowing the bank to try to seize other assets you may have if the foreclosure proceeding nets less than the bank feels it is owed.   What about a private money loan ? Are most private money loans written WITHOUT deficiency clauses  ?

 Thanks Brian.

I tried to include part of the first mortgage amortization table, the rows showing years 25 through 27 during which the first mortgage loan balance declines  by 100K but it lost its formatting after I pasted it in.  The pertinent  figures are:

year 25................... 260K

year 26...................  210K

year 27................... 160K

The 750K the seller will take for the house is AFTER deducting the 150K repairs, a number I pulled out of a hat for the sake of an example.  That is he wants 900K BEFORE deducting for repairs.   I wanted to work out an example using 'subordination',  putting the house up for collateral to get a second 450K mortgage in order to give the seller his 250K DP and have the 150K for hypothetical repairs plus pick up 50K pocket money.

Thanks for the JV (joint venture ?) and SPOA (special power of attorney ?) concept, a strategy I must admit I know precious little about but will research more.

The Problem

1.  The seller will take 750K for a house with an AVR of 1000K

2. The house needs 150K worth of work

3. He won't get out for less than a 250K Down Payment 

4. He owes 260K on the mortgage

5. His payments are 5000 a month PITI

6. He will seller finance sub2

7.  He's on year 25 of the mortgage as follows:

The Proposal

1.  Take out a second mortgage 450K   private money loan at 5 % with 2 year balloon interest only payment of 1650 

2. Give the seller a carry back third mortgage at 0 % interest  for 240K with a 2 year balloon 

The Exit

1.  Lease option the house to a tenant buyer for 7500 a month

2.  Right to purchase for 1,075,000

2.  Down Payment of 75K to be applied to purchase price

Deal Analysis

1.  At closing pocket 50K, set aside 150K for repairs, give seller his 250K DP

2.  Collect buyers 75K DP

3.  Collect 850 per month rent x 24 months = 20K

4.  At end of two years collect 1,000,000 from buyer

5.  Pay off 160K still owed on first

6.  Pay off 450K owed on second

7   Pay off 240K owed on third

Total value of the deal

   (50 + 75 + 20 + 1000 ) - (160 + 450 + 240) =  1145K - 850K = 295K

Have I got it all goofed up good, or could this possibly be feasible ?