Pop Quiz

[ctguy]

That's my problem too.
If it was free and clear, I'd do full price, principle only payments for 5 yrs, balloon at term. I'd then lease option it out for 3 yrs and make my money over the term on payments and deposit.
You can do just about the same thing if it is sub 2 with some equity. I'd get the seller to hold a note for the equity with no payments on a three year contract, five if I could get it.
What I was wondering about is two things:

First, if you could get the bank to sell or short the note, you would increase the equity in the house, and thereby increase your profit. But I don't know if they would, on a performing note.

Second, could you have a private investor buy the house with his perfect credit at a much lower monthly payment. Then buy from your investor sub 2, and sell to a lease option buyer for a higher payment. Once again making your money over time on deposit and cash flow.
Then maybe sell off the note in two parts to note buyers for cash?

I still think there is something that I am missing, But its fun to think about. Thanks for playing along.

[propertymanager]

First, if you could get the bank to sell or short the note, you would increase the equity in the house, and thereby increase your profit. But I don't know if they would, on a performing note.

Second, could you have a private investor buy the house with his perfect credit at a much lower monthly payment. Then buy from your investor sub 2, and sell to a lease option buyer for a higher payment. Once again making your money over time on deposit and cash flow.
Then maybe sell off the note in two parts to note buyers for cash?

I still think there is something that I am missing, But its fun to think about. Thanks for playing along.

Yes, there is a LOT that you're missing.  I would suggest doing an archive search on short sales, lease option, and sub 2.  You've got them all confused.

Banks do not do short sales on performing loans.

No competent investor is going to use his good credit to buy a house and then sell it to you sub2.  When you do a sub 2 deal, the buyer gets the deed and the seller keeps the note.  That is VERY risky for the seller and no competent investor with good credit is going to do that.  Desperate sellers sell sub 2.

Lease options are not the great deal that the gurus would have you believe.  Very few tenants "lease option buyers" have money for a significant option premium and they don't have good credit or they would just buy a house.  While you're waiting for the lease option buyer to come along with his big pile of money, you're losing rent during the period that the house is vacant.  I could write 3 or 4 pages on the reality of lease options, but you can find some of it in the archives.

Mike

[propertymanager]

Hey mike how do you buy your properties?

jb_bak,

I buy my properties in many different ways, but I ALWAYS buy at a big discount.  When I first started, I looked for deals through my realtor (and no I didn't and don't mind paying her commission), with a small ad in the newspaper, through networking at my local REIA, etc.  Now, people offer me deals all the time.  My realtor calls when she knows of someone desperate enough to sell at a big discount.  Disgruntled landlords call when they need desperately to get rid of their deals.  I hear of deals at my REIA, etc.  I have also bought properties at foreclosure sales, estate auctions and estate sales.  I have bought a bunch of REOs (again through my realtor).  

As far as purchasing techniques.  I have paid cash for many properties and then refinanced them into blanket mortgages.  I have bought sub 2, using lease options, with bank financing, and with owner financing.  Whatever it takes to get a great deal.  However, no matter the method, I ALWAYS and ONLY but at a BIG discount.  I would never pay retail  -  it just does not make sense.  

Mike

[ctguy]

Maybe the second investor idea is not a good one, it's something I just thought of.

As for Lease option people, I market to them consistently anyway. I also have a credit repair business. It usually takes less than a month to get my houses sold that way.

Today I spoke to my local short sale specialist about this question. His first thought was  obviously that it couldn't be done. But then he proposed that this is essentially pre-pre-forclusure. He suggested to create equity by gettting the bank to reduce the mortgage by the cost of the realtors commission the bank would have to pay to sell the house after a forclosure.

Still thinking

[John_in_NC]

jb_bak,

I buy my properties in many different ways, but I ALWAYS buy at a big discount.  When I first started, I looked for deals through my realtor (and no I didn't and don't mind paying her commission), with a small ad in the newspaper, through networking at my local REIA, etc.  Now, people offer me deals all the time.  My realtor calls when she knows of someone desperate enough to sell at a big discount.  Disgruntled landlords call when they need desperately to get rid of their deals.  I hear of deals at my REIA, etc.  I have also bought properties at foreclosure sales, estate auctions and estate sales.  I have bought a bunch of REOs (again through my realtor).  

As far as purchasing techniques.  I have paid cash for many properties and then refinanced them into blanket mortgages.  I have bought sub 2, using lease options, with bank financing, and with owner financing.  Whatever it takes to get a great deal.  However, no matter the method, I ALWAYS and ONLY but at a BIG discount.  I would never pay retail  -  it just does not make sense.  

Mike

Thanks very much mike. The more I read your posts the more I realize what you do is what I want to do someday.

Thanks again

John

[kdhastedt]

Please, tell me that you don't mean that you want to be like Mike when you grow up!

LOL

Keith

[Steve Smith]

That's my problem too.
If it was free and clear, I'd do full price, principle only payments for 5 yrs, balloon at term. I'd then lease option it out for 3 yrs and make my money over the term on payments and deposit.
You can do just about the same thing if it is sub 2 with some equity. I'd get the seller to hold a note for the equity with no payments on a three year contract, five if I could get it.
What I was wondering about is two things:

First, if you could get the bank to sell or short the note, you would increase the equity in the house, and thereby increase your profit. But I don't know if they would, on a performing note.

Second, could you have a private investor buy the house with his perfect credit at a much lower monthly payment. Then buy from your investor sub 2, and sell to a lease option buyer for a higher payment. Once again making your money over time on deposit and cash flow.
Then maybe sell off the note in two parts to note buyers for cash?

I still think there is something that I am missing, But its fun to think about. Thanks for playing along.

The fact that you are giving a quiz implies that you have something to teach.  But your posts seem to be a rehash of Sheets or some other guru material.  Do you mind sharing your experience level?

The simple answer is that your example is not worth pursuing.  And "throwing a dart at the real estate section and making $30k to $60k for each throw" is a ridiculous pipe dream.

[TNVOLS]

HI Ctguy,

Imagine if you could throw a dart at the real estate section ad make 30-60 grand with each throw?

You have definitely piqued my curiosity, how can you make 30 to 60k on this deal?  I can't wait any longer to know!


Mark

[propertymanager]

And "throwing a dart at the real estate section and making $30k to $60k for each throw" is a ridiculous pipe dream.

...and yet that is EXACTLY what many of today's most popular "gurus" are selling...a ridiculous pipe dream.  They promise 20K per month to be an apprentice, $250,000 for 20 minutes work, etc.  In their infomercials, they are standing on their yachts and getting in their private jets implying that if you only take their training, you too will have a yacht, a mansion on the water, and a private jet!  Ridiculous!

I was at a REIA convention a year ago.  There were a group of ladies, that based on their dress, looked like they just came from the welfare office.  The "guru" got them all whipped up and at the end of the presentation, they were lined up at the back table to buy the $1,500 course.  I remember watching one lady who had to present 3 credit cards before they could finally piece together enough credit for her to buy the course!!!  I'd bet $100 that the course is still in the wrapper!

Ranf Off.

Mike