How a flip turned to holding the mortgage turned to massive returns

[rookieNYC]

As some of you may know I do own some income properties..As I became disenchanted with the *cashflow/landlording* business I was looking at different ways to make money from these properties..I actually spent some time speaking to fdjake about these strategies and they worked perfectly...I recognized alot of properties were for sale but very few with owner financing...The particular property I'm talking about I purchased for an insulting all cash offer for 44k (2 family) *no mortgage*...I found an all cash buyer for 65k a few months later miraculously in 2008..So at the time I had 21k+ profit booked on the deal..The same person called me up and wanted to buy another property I owned free and clear and I offered HM financing (short term,high rates,points etc)...This person had NOT learned the business yet and I knew that but why ruin a good deal with honesty..The main part of this deal was  I *asked* this person for additional capital/collateral, so he put up the free and clear house he bought for 65k as *cross collateral*...He put down %20 on the second property and I held a 50k HM rate loan for the last 2 years...Now I'm up to about $55,000 in NET profit all around...To make matters even worse he moved out of state and had a property manager run his properties..Here is where I compound my money...In typical fashion this guy starts to lose control,patience,money...He calls me the other day and begs me to take *both* properties away without litigation..I do a little research and find he hasnt paid $6000 in taxes on the 65k property..I agree to payoff the tax bill and take the property..My attorneys send him the package with the deed in lieu/quit claim etc and he quickly signs and notarizes everything and the deal is done..Now I have a minimum 55k property for free plus my own property back...I figure its around a $100,000 + payday...Between the profit from the first sale ($21,000) then the HM loan on the 50k for 24 months ($20,000)...The %20 down payment on *my* property ($15,000) and now the ($65,000 which is really a $55,000 property now) $111,000 minus the tax bill and minor legal costs etc lets alloocate $10,000....$100,000 move...Point being there is many ways to make money in RE...I know this is an example of profiting off the mistake of someone else but business is a zero sum game...Someone has to lose for someone to win...Lesson learned is landording and *some* property managers can ruin your business...

[furnishedowner]

That was a post from the "real world".  May people have tried being a landlord, a real estate investor but they don't have the common sense or discipline to make a go of it.  They learn that they should just stay with a salaried day job.  It's a life lesson.  All the time I hear people say, "I hated being a landlord...it's not for me."

Others of us like rookieNYC adapt to the changing market and constantly try to find new ways to generate money from real estate:  buy it, sell it, fix it, rent it, lend money on it, carry the note, foreclose, do it all.

On the little property that I just bought the bank cross-collaterized ALL our other loans on that note.  Kind of a shocker when I went to sign the pages-long note!  If I don't make the $160/month mortgage payment on a $27,000 house, they can take 14 other houses!  That was an eye-opener, but it does make sense from the bank's point of view.  They had already had to foreclose once.

You have just given other investors a very good tip.  Carry the note, but get other security for it as well.  So when things go wrong you are acting like a smart bank, not an incompetent wanna-be landlord.

Furnishedowner

[Sean_L]

Great work Rook...

[rookieNYC]

Ty Sean...I currently listed the property and found out the annual taxes are $2000 cheaper than I thought...which is a huge selling point....I was ready to hire an attorney to lower them anyway..But no need...Just a phone call to a nice lady at the tax assessors office...She said the reason the tax bill was so high is because lack of payment forced the county to levy everything tremendously higher...To the tune of almost %100 higher..Whats up with that?????...No complaints here...What a day ....

Be careful Furnished....Not that you will default but the banks smartened up from the shalacking they took over the last 2 years...

[davewindsor]

As some of you may know I do own some income properties..As I became disenchanted with the *cashflow/landlording* business I was looking at different ways to make money from these properties..I actually spent some time speaking to fdjake about these strategies and they worked perfectly...I recognized alot of properties were for sale but very few with owner financing...The particular property I'm talking about I purchased for an insulting all cash offer for 44k (2 family) *no mortgage*...I found an all cash buyer for 65k a few months later miraculously in 2008..So at the time I had 21k+ profit booked on the deal..The same person called me up and wanted to buy another property I owned free and clear and I offered HM financing (short term,high rates,points etc)...This person had NOT learned the business yet and I knew that but why ruin a good deal with honesty..The main part of this deal was  I *asked* this person for additional capital/collateral, so he put up the free and clear house he bought for 65k as *cross collateral*...He put down %20 on the second property and I held a 50k HM rate loan for the last 2 years...Now I'm up to about $55,000 in NET profit all around...To make matters even worse he moved out of state and had a property manager run his properties..Here is where I compound my money...In typical fashion this guy starts to lose control,patience,money...He calls me the other day and begs me to take *both* properties away without litigation..I do a little research and find he hasnt paid $6000 in taxes on the 65k property..I agree to payoff the tax bill and take the property..My attorneys send him the package with the deed in lieu/quit claim etc and he quickly signs and notarizes everything and the deal is done..Now I have a minimum 55k property for free plus my own property back...I figure its around a $100,000 + payday...Between the profit from the first sale ($21,000) then the HM loan on the 50k for 24 months ($20,000)...The %20 down payment on *my* property ($15,000) and now the ($65,000 which is really a $55,000 property now) $111,000 minus the tax bill and minor legal costs etc lets alloocate $10,000....$100,000 move...Point being there is many ways to make money in RE...I know this is an example of profiting off the mistake of someone else but business is a zero sum game...Someone has to lose for someone to win...Lesson learned is landording and *some* property managers can ruin your business...

Until you sell the properties, it sounds more like a $0 payday or even taking a loss with a negative one.  I don't think they are worth any more than mortgage value if that.  If you really made a $100,000+ payday, why would the borrower quit claim to you the two buildings for a release of liability instead of listing it with a realtor to sell it?

If there's a $100K payday, it should be easy for him to sell it for a $50K or $20K payday after realtor commission instead of giving it back to you for free.  These are houses after all, not large commercial buildings.  They should be easy for him to sell at a discount through a realtor if you claim there's a $100K payday here.  I don't think he's that stupid.  You only get a NET PROFIT if you sell the buildings, not hold onto it.  I think you took a hit here, bud.

[rookieNYC]

My old friend Dave....

Yeah I took a hit..LOL...fwiw he couldn't pay the tax bill because he was broke and it would violate my contracts...And I have already netted the $21k profit from the flip...Also netted 20k profit from the HM loan...Also netted 15k downpayment from other sale..56k total....Plus I have the house he gave back to me free and clear....thats worth 55k....So how on earth can u say I took a loss...I know u are a hater but u have taken your jealousy to a new level of stupidity now...Dont bother me as u aren't worth the time to respond to...You are a small time hater....

[davewindsor]

My old friend Dave....

Yeah I took a hit..LOL...fwiw he couldn't pay the tax bill because he was broke and it would violate my contracts...And I have already netted the $21k profit from the flip...Also netted 20k profit from the HM loan...Also netted 15k downpayment from other sale..56k total....Plus I have the house he gave back to me free and clear....thats worth 55k....So how on earth can u say I took a loss...I know u are a hater but u have taken your jealousy to a new level of stupidity now...Dont bother me as u aren't worth the time to respond to...You are a small time hater....

I call bullsh-it.  What you said doesn't make any sense.  Someone is really going to give you back two houses over a $55K loan so you can immediately make a $100K net profit instead of them trying to sell it themselves.  If he was in tax arrears, he was probably already trying to sell it and couldn't, but here you come along and do it with the snap of a finger.   I'm not jealous; it's just that what you're saying is really really stupid.  I think your story has about as much credibility as the tooth fairy.

[rookieNYC]

Dave
Without getting into with you I will state the facts that I didn't think I needed to earlier...
1.The first loan was in default and I held DEED IN LIEU OF FORECLOSURE ON 2 PROPERTIES...the one I had the HML on and the collateral property...
2.Yes your hunch was correct...He was trying to sell the property(s) and could not...Due to the market conditions in upstate NY which suck and the tight lending criteria...
3.The property managers were having their way with him...Billing him for work that was never done and dealing with delinquent tenants...
4.The taxes/water/sewer/garbage bills were constantly being levied UPWARDS simply because he was not staying current and not making payments...
5. A threatening letter was sent from attorney to warm him up to the forfeit at this point...

As all things I state I would be more than willing to fax/email all of the contracts to any moderator of YOUR choosing...To think I come to this forum to lie and make up stories is laughable at best...To be questioned from a subordinate such as yourself who lost it all makes it even more laughable and insulting...A peasant of your financial stature has no right to question the likes of me at any time...Enjoy the luxury of the internet and keep harassing me so I choose not to post anymore...That would be helpful to all here and surely you could partially fill my void with lectures on how to go broke....

is really going to give you back two houses over a $55K loan so you can immediately make a $100K net profit instead of them trying to sell it themselves

It took me 8 years to move from buying my first duplex and other converted houses into buying an 18 unit building.  I'm taking a huge financial loss over a building I'm dumping this year (probably in the $200K range--money that could have been used as a downpayment for something better) and it's sending me back years from where I thought I'd be, but I'm still happy.  It kinda burns at my heart and soul when I think about how much time I spent rehabbing for less than min. wage, but no regrets.

  This is even funnier after I thought about that you gave someone $200,000 of YOUR OWN money because you made an error in judgement...But to assume I made $100,000 is a lie...LOL...The only mistake I made is not finding a sucker like you so I wouldve made $200,000 instead of $100,000...

[furnishedowner]

davewindsor is not figuring in the human angle on this.  That buyer was sick and tired of the properties, the debt, the letters, the stress.  He became a "DON'T WANT 'ER". 

When owners hit that level of-- "Just get it off my hands, I don't want to deal with it ever again!"--that's where a buyer, or lender in this case can make money.  Lots of money.

We've all made money AND lost money in real estate if we've done it long enough and through enough cycles.  We've all made errors of judgment.

Heck, I sold a house in California and had to put money into escrow TO CLOSE, and that was right before the housing bubble!  If my crystal ball hadn't been so cloudy I could have made big bucks on that one.

The lesson here is how to capitalize (and help out of his misery) a burnt-out owner.

Furnishedowner

[davewindsor]

Dave
Without getting into with you I will state the facts that I didn't think I needed to earlier...
1.The first loan was in default and I held DEED IN LIEU OF FORECLOSURE ON 2 PROPERTIES...the one I had the HML on and the collateral property...
2.Yes your hunch was correct...He was trying to sell the property(s) and could not...Due to the market conditions in upstate NY which suck and the tight lending criteria...
3.The property managers were having their way with him...Billing him for work that was never done and dealing with delinquent tenants...
4.The taxes/water/sewer/garbage bills were constantly being levied UPWARDS simply because he was not staying current and not making payments...
5. A threatening letter was sent from attorney to warm him up to the forfeit at this point...

As all things I state I would be more than willing to fax/email all of the contracts to any moderator of YOUR choosing...To think I come to this forum to lie and make up stories is laughable at best...To be questioned from a subordinate such as yourself who lost it all makes it even more laughable and insulting...A peasant of your financial stature has no right to question the likes of me at any time...Enjoy the luxury of the internet and keep harassing me so I choose not to post anymore...That would be helpful to all here and surely you could partially fill my void with lectures on how to go broke....

is really going to give you back two houses over a $55K loan so you can immediately make a $100K net profit instead of them trying to sell it themselves

It took me 8 years to move from buying my first duplex and other converted houses into buying an 18 unit building.  I'm taking a huge financial loss over a building I'm dumping this year (probably in the $200K range--money that could have been used as a downpayment for something better) and it's sending me back years from where I thought I'd be, but I'm still happy.  It kinda burns at my heart and soul when I think about how much time I spent rehabbing for less than min. wage, but no regrets.

  This is even funnier after I thought about that you gave someone $200,000 of YOUR OWN money because you made an error in judgement...But to assume I made $100,000 is a lie...LOL...The only mistake I made is not finding a sucker like you so I wouldve made $200,000 instead of $100,000...

First off, the money I lost was over a vacant commercial building over 30,000 sq. ft., not 800 sq. ft SFH that almost anyone can afford and is easily rented.  The market spiralled downward making financing harder to get for me.  I think big, not small.  Had it been a house like your case, it would have been a completely different story.  I would have sold it right away for some kind of profit instead before giving it back to the bank.  You give back houses worth less than the mortgage amount, not more.  The banker sees an advantage to this as he doesn't have to waste a lot of money on court fees and legal work. 

Vacant commercial buildings are a lot harder to sell because there's a smaller market that would buy them.  You know that.  The comparison to me is apples to oranges.  If anyone here is the peasant, it's you because you're dealing with tiny, inexpensive huts that peasants live in.  I won't touch a building less than 15,000 sq. ft. 

I still don't buy your bs story.  I would like to see your proof.  To put a house up for sale, the vendor only needs to sign a listing agreement with a realtor.  It takes 10 minutes.  The realtor does the rest.  You said he tried to sell it.  OK, but It shouldn't have taken a realtor that long to sell it if he discounted it for less than the $100K you made.  It should have sold before going back to the bank if it was worth what you claim.  And, I doubt it's that hard for someone to get a loan on a $55K house that they'll live in, esp with all the gov't programs out there.  This didn't sound like some mom and pop/incompetent guy, but, if I assumed your claim were true for a second, some investor with at least some skill who you were confident enough to lend money to.  Houses are not that hard to sell, especially when it can be discounted since you claim you made $100K on it.  As an investor, it should be an obvious option that he could discount it and sell It.  It smells of bullsh-it and someone trying to sell an expensive coaching program he doesn't deserve to sell because he made it all up.

Please, upload pdfs proving what you say.  I'd love to see you prove this bs.

[Sean_L]

Dave Upstate New York is a horrid market. However, this year has seen some decent gains which, I attribute to lows rates. I was a mortgage banker in Upstate NY for many years and the credit quality of the buyers in the market is bad to say the least. I did more sub-prime and Alt-A than anything else.

The fact that he didn't sell it is most likely the price he was willing to accept. He likely wasn't willing to take the hit while he had the chance. Then came this letter with an intent to foreclose. It sounds like that broke his will to hold out. Not to mention he's out of state now.

Then you have to look at the financing arraignment they had in place. A DEED IN LIEU OF FORECLOSURE ON 2 PROPERTIES. This arraignment allows rook to take these properties with out having to go through the typical foreclosure process which, in New York can take 12 months or more.

I think rook made an educated business decision and the owner didn't know anything more than he wanted to own real estate and he got creamed for lack of education. 

[rookieNYC]

Dave
I won't post anything on an open forum but I will gladly fax/email anything and everything related to this deal to any moderator...I feel comfortable passing my contracts to Chris W because we already have a working relationship in place and he knows what I do for a living...All the same I will send him my brokerage statements as well as business notes and mortgages I hold ....I ask that you send your holdings as well though because I truly feel you are nothing more than a scorned hater who isn't educated in the foreclosure process whatsoever....I had a signed DEED IN LIEU OF FORECLOSURE ON BOTH PROPERTIES....Do you have a RE attorney?...I didn't think so...Deed in lieu gives me the power to make a decision when the loan went into default...And you say he could deal with the bank?...What are u missing?...I was the bank.....Its ok for you to hit the bid and lose $200k but its not ok for someone to lose $100k...???...Are you that blinded by jealous rage?....Please arrange for your documents to be sent to Chris W and when he advises me he is in possession of them I will forward everything I have...And I guarantee I'm worth 10x more than you...IN LIQUID ASSETS..RE IS NOT LIQUID ASSETS.....I have no doubt that like your real estate holdings you are upside down...You are harassing me because I exposed you for what you are...A broke bum sore loser...You also have no clue how depressed the Upstate NY market is...If you did you would realize that simply selling at a discount is not an option...Plus he was in DEFAULT...What part don't you understand....HATER...

Chris W.
Please advise me or call me as you have my number and I will send you everything...I will call DaveWindsors bluff because I know he is a broke bum...

[rookieNYC]

Another thing Dave....I bought these cheap 2 & 4 family properties years ago...I wanted to see about this cashflow business before I went in with size money...Something you shouldve considered before you got your legs chopped off playing a game you weren't properly funded for...I also own NNN properties that are leased to strong franchises as well as condos...multi family homes...single family homes up and down the east coast...Im currently holding $x.x in hard money loans with over x.x in collateralized properties all held contractually with DEED IN LIEU OF FORECLOSURE...I will send Chris W all of my pdf files as well as my spreadsheets to match the pdf files...I hold over x.x in business notes owed to me at HM rates and I have these signed and notarized contracts ready to be faxed to Chris W....Never mind my brokerage accounts....Whenever you are ready I'm ready...I think your full of blank up to your eyes...Vacant buildings..LOL...Please accept my challenge...I guarantee you I'm worth 10x more than you LIQUID...never mind my vast holdings....You are a joke...

[davewindsor]

Dave
I won't post anything on an open forum but I will gladly fax/email anything and everything related to this deal to any moderator...I feel comfortable passing my contracts to Chris W because we already have a working relationship in place and he knows what I do for a living...All the same I will send him my brokerage statements as well as business notes and mortgages I hold ....I ask that you send your holdings as well though because I truly feel you are nothing more than a scorned hater who isn't educated in the foreclosure process whatsoever....I had a signed DEED IN LIEU OF FORECLOSURE ON BOTH PROPERTIES....Do you have a RE attorney?...I didn't think so...Deed in lieu gives me the power to make a decision when the loan went into default...And you say he could deal with the bank?...What are u missing?...I was the bank.....Its ok for you to hit the bid and lose $200k but its not ok for someone to lose $100k...???...Are you that blinded by jealous rage?....Please arrange for your documents to be sent to Chris W and when he advises me he is in possession of them I will forward everything I have...And I guarantee I'm worth 10x more than you...IN LIQUID ASSETS..RE IS NOT LIQUID ASSETS.....I have no doubt that like your real estate holdings you are upside down...You are harassing me because I exposed you for what you are...A broke bum sore loser...You also have no clue how depressed the Upstate NY market is...If you did you would realize that simply selling at a discount is not an option...Plus he was in DEFAULT...What part don't you understand....HATER...

Chris W.
Please advise me or call me as you have my number and I will send you everything...I will call DaveWindsors bluff because I know he is a broke bum...

You'll show it when I show it?  WTF?  You were the one who offered to prove what you say in your earlier post.  Now you're backing down and making excuses not to show it.  You're full of sh-it.  You offered to prove you made $100K in your earlier post.  Post it in PDF so I can see it because it sounds like your talking out of your ass again.  Don't wait for me to do anything because I never offered to prove anything like you did nor did I make any outrageous claims like you did. 

Again, as for losses it's an apples to oranges comparison to me.  Vacant Commercial buildings are a lot harder to sell than houses.  OF course, I have an RE Attorney.  The issue is not your understanding of DEED IN LIEU OF FORECLOSURE, but whether you pulled this off and made $100K like you claim.  I don't really care whether you did a DEED IN LIEU OF FORECLOSURE.  I don't even care what your net worth is in regards to this thread.  What's relevant is whether you made the kind of money you claim doing it.  That's what I'm challenging.  And until I see proof that you made $100K, I will continue to say you're full of sh-it because you are.

A sore bum loser?  That's what you think?  You're gonna make it personal again?  Sorry, you're wrong.  I'm always in the game.  You know what I think about you?  I think if you have money, then you're some kind of trust fund baby who got everything he has handed to him on a silver platter by daddy and never worked a day in his life and is wasting away his daddy's trust fund..  Perhaps, landlording is bad as you say because you don't have the initiative and balls to make a difference.  That's what I think about you.

[rookieNYC]

LOL....Trust fund baby?....I was raised in LES....Lower East Side of NYC...The son of a carpenter turned home builder...My mother is an RN.....Hardly even a silver spoon...Im actually self made...Paid my way through college and grad school working my u know what's off...No one ever gave me anything...Infact I help my parents out financially now...I even pay for my sister's medical school because she is now a Dr after being an RN for 15 years....I pay for my nieces and nephews to go to great camps each summer....No one ever gave me anything....Nice diversion on your part...Im assuming you aren't taking me up on my challenge...I thought so...You talk the talk but can't walk the walk...Typical...Im asking you to please stop harassing me now...I will stop belittling you if you do the same...You know you only called BS on me because of a personal beef and no other reason...Making 100k on this deal is not a lot of money to me seriously...I was only trying to show there are other ways to skin the cat so to say....fwiw I don't lie about money ever...Whether it be how I make it...Deals I do....Loans I make etc...Not my style...Dealmaking is my life and passion...Id like to end this ongoing battle with you if possible...If not I stand by my earlier offer...My life...financials is an open book to Chris W if u want...I trust him to review both sides and make a determination...If not ..peace...