Get This Paperwork Done to Develop Massive Equity in Property You Don’t Own…Yet
By Don Christie :: August 23, 2007 :: Property Investment, Property Finance, Negotiating Techniques, Creative Transactions
Imagine for a minute you find a vendor or seller who desperately needs to sell their house today, for whatever price (yes whatever!, more later).
You know you are able to afford the repayments on the house, but might not get the approval fast enough to secure it, TODAY. What are you left to do? Well unfortunately, you will miss out on this property, just like everyone else the vendor has called or asked to buy it.
May I suggest a strategy I have used to get things done when the banks say NO?
Assume the vendor’s loan. Simple as that.
What is stopping you from taking over the payments to the vendor’s bank? You will even ask him to keep the loan open so you can make the payments tomorrow if need be. Sounds very simple - and it is. Obviously the next thing you’re going to do is get everything sorted out by a solicitor so the owner cannot come back and try to sell it on you or refinance it.
The vendor will have a bank statement somewhere so that you can make sure what the minimum repayments are and what is outstanding, so you know what you are assuming.
Using this strategy needs some caution as to how you go about the assumption; the stamp duty paid (only after you get your own loan), the vendor not being fussy about the time frame of the assumption, and the legal rights of everyone involved. Also, what you are able to do with the property before you actually buy it!
It is also rewarding as you can walk in one door and walk out the back - just bought a house with no banks involved and a whole heap of leverage, without doing more than getting pieces of paperwork out of your bag.
The leverage is unlimited, you could:
- Renovate and refinance.
- Vendor finance it to someone (my favourite!), wrap, or lease option.
- Rent it out or sell it, as you have the time to wait for a genuine sale. People would want this house on the assumption stage and you could on-sell even that for quick cash.
Either way there are always ways of making a dollar in today’s marketplace using a bit of left brain thinking to an age old process of buying a house.
Make your job of ‘controlling or owning on paper’ properties as easy as doing things a little bit differently from what other investors are doing in the marketplace. Go and see your property solicitor and get them to outline what you can do on paper in your state to control and assume property.
Don Christie
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On September 6th, 2007 at 12:37 am | Mike Said:
Are you serious. What happens to the guy with the loan on the house when the new owner stops paying for the loan.
On September 7th, 2007 at 11:57 am | eddie Said:
what I dont understand is why would the seller give them a second mortgage after he’s given it to them to sell.
Also; if they sell the scond mortgage for 40k then when they new buyer gets the 60k they’ve really only made 20k havent they, not to suggest that this is to be sneezed at by any means, still well worth having.
thanks
On September 7th, 2007 at 5:35 pm | Don Christie Said:
Mike,
If you had the chance to buy a house this way would you miss any payments? They still own it on paper, you are merely paying it off for them until you can get your money together or refinance them out.
Eddie,
When you sell the house at $300,000 for example, you can leave in what is called a 2nd Mortgage. The new buyer agrees to get a loan for the 80% and you can then get on with your life and equity.
The new buyer owes you the 20% or in this case $60,000. You can have that paid like an investment term deposit. ie $125 / month in interest with the amount owing.
Your question is why sell that ‘right’ for $40,000? Its probably a profit from capital growth anyway, but you reach so many people in the market place that do not have a deposit or cannot get regular finance.
I think for about 5 hours work, you can get you buyer ready to buy from you and your seller setup to get on with their life.
If you only make $20,000 for 5 hours work, i can guarantee you its better than most professions, and remember you did not have to get a loan to get control of the property.
Cheers
Don
On September 14th, 2007 at 1:34 pm | eddie Said:
Donchristie; I’m sorry but theres something I don’t understand about this arrangement; Please correct me where I’m wrong but as I see it;
Person A, wants to sell his house so he gives it to person B. Person B sells it to person C on time payment directly to person A.
Does B take the 2nd mortgage from A or C????
C pay back the 2nd mortgage to person B who sells it to D????
Is not person B acting as an agent for which a licence is required.
Why would person A give his house to B to sell it for whatever he can get?
thanks
On September 15th, 2007 at 8:32 am | Don Christie Said:
Hi Eddie,
You need to get your head around this.
There is always 3 people in the system. You are just the guy putting it all together, or making two other parties meet.
One guy needs to sell due to divorce or sickness, so they will give you the chance to sell it if you talk to them like you are a guy who is going to do what you say you are going to do.
As for person a scenario you talk about is a 2nd mortgage carryback, you can read more about it in other posts on my site.
I think reading more informaion about Lease Options or Rent Buy in my posts also.
Don
On September 18th, 2007 at 8:16 pm | Brett Said:
Hi Don,
I am very familiar with and completely understand this concept, however have had no luck in putting a deal like this together despite several attempts! I am also on the Gold Coast, and find that every time an agent is invloved, the deal is dead before you begin…
Have you found this to be the case also? I guess my question to you is: Do you put these together through people selling privately, or is there a trick to getting an agent on board with the idea?
I really look forward to your answer, as this particular strategy interests me greatly and I would love to be doing this today!
Many thanks,
Brett
On September 20th, 2007 at 9:15 am | Don Christie Said:
Make sure that the agent gets some money or at least a deal that he will be paid. Thats all they want, then they will work at getting your deals done.
When wrapping property, I am happy to pay the agent a trail commission just like a broker gets paid by the bank. Only if they introduce me to the ‘client’. This usually occurs when the agent has got thier client to contract stage and they collapse. Then they call me!!
Private sellers are nervous enough, with out confusing them!
Don
On September 20th, 2007 at 9:58 am | Brett Said:
Thanks for your advice Don. I guess it is a matter of having good relationships with agents as you’ve said earlier, and also having some cash upfront to cover the agents commission…
I don’t want to harp on this topic for too long, but would you be able to give a brief commentary on wording and how you have successfully approached the idea with an agent. I feel that this is probably the key and could assist a lot of people out there trying to pull this off.
I’ll let you know when one comes off for us - hopefully not too far down the track!
Cheers,
Brett