1) Where are these properties located?
In the mid-west, mostly east of Colorado, and the east
2) Is the Sales/Support Package included in the price of the REOs sold at less than $21,000?
Usually the sales/Support package costs $1,500 per property. This is to cover the cost of having staff in the Midwest survey the neighborhoods, put a new combination lock box on the door, place a few For Sale signs on the outside with an 800# (cost of such number is also covered). Additionally it also covers the cost of the staff in the office that takes all calls and qualifies buyers as well as drafts the installment sales contract (Land Contract) and finalizes the installment sale. For that fee my staff does all the research and promotion for you to get the property sold using a land contract producing cash flow. Usually the offer is $500 to $600 down payment and a low monthly payment of apx. $300 to $400/mo. for 15 to 20 yrs. (selling price on land contract note between $30,000 and $40,000) And we charge the buyers 9.9% interest because their credit is usually not the best (We make sure it is less than rent in the area to sell fast within 90 days as is where is, so you do not have to repair anything in the property)
BONUS: For a limited time only we are WAIVING the $1500 SSP fee for individual properties!
3) Are these properties in an acceptable condition?
The properties are in a livable/sellable condition. Some may need some improvement but the terms are so attractive that properties ell fast as is. (The terms are attractive because the payments to own any of the homes are less than the rent in each of the neighborhood for the same size homes)
4) What is the difference between selling on a land contract versus selling normal?
A land contract is a contract between the investor/seller and the buyer/end user whereby the buyer has to make monthly installment payments over 15 or 20 years (maybe even more) to purchase the property. A land Contract is made when the seller (you) allows an end buyer (the person who will live in the property) to sign a contract with you committing to a certain sales price (e.g. $35,000) with a small down payment (e.g. $500) and a series of small monthly payment (e.g. $300) for a period of 15 or 20 0 years (9.9% interest).
You in fact give them the chance to take the house “as is - where is” and not go through a regular bank to qualify because maybe their credit is not good enough or the property needs some basic remodeling or maybe they do not have enough money for a down payment etc.
This is a win-win for everyone as they get a chance to rebuild their credit, own a home by building equity through their monthly payments while you get to sell the property fast, at a better price and with little if any hassles.
The end buyer will make the payments to you (via a national loan service company) plus they will pay the property taxes and insurance.
You would have the legal right to collect and in case of default you can evict (and not foreclose) - which is faster and easier because you are still retaining the deed/ownership of the house and you do not transfer it over to them until they sell the home, or until they refinance and cash you out, or until they make payments on time for a period of time (usually 24 months). After that time you will sign over the deed (you would sign a form called a quit claim deed).
So the end buyer has all the incentives to accept the property "as is - where is" and stick to the payments.
You become like the bank but you make more money because as an example if you bought the property at less than $21,000 and it sold on a land contract note for say $35,000 with a payment coming to you of $325 a month, you end up having a long term, secured position with positive cash flow with aprox 20%/yr.
5) When I sign the Deed over to the buyers after 2 years of satisfactory payments how can I make sure they continue to pay on time?
Signing the Deed over to them does not mean that they will stop paying you. If they do you can foreclose on them just like a bank. Remember that you are still holding the Land Contract note and it will be recorded to protect your rights.
A bank for instance gives the buyers the grant deed on day one of their purchase even if they are getting a loan. We wait 2 years for extra protection as the land contract allows us to evict if they default instead of foreclose. Evicting is faster and easier.
Buyers that get a loan from the bank have to sign a note (trust deed or mortgage) that gets recorded against the property to protect the bank. We do the same thing but we use a Land Contract and delay giving them the Deed till they make 24 payments on time.
6) If it’s so good and easy why are you not doing these for yourself?
We are doing these deals for ourselves, hence the support staff. But to keep the discounts we receive from the bank, our partner has to purchase a lot more properties than we can handle, so we decided since we have the infrastructure with road staff and office staff we can easily sell some of the REOs to investors and charge them to sell their properties on a Land contract note where everyone benefits. We have opened this opportunity to as many serious and sophisticated investors as possible and everyone with no exception has been making money so far.
7) Other than the purchase price of the property of less than $21,000 and the sales/service package fee of $1,500 to create the land Contract with the Guarantees what additional fees do you anticipate an investor would have to pay?
We are WAIVING the $1500 SSP fee for a limited time only, so you’ve already ahead of the game! We sell the property for you at no cost.
There is a $150.00 transfer deed fee. You may want to get property insurance at the cost of aprox. $20/mo. for $21,000 coverage or $60/mo for $50,000 coverage along with the property taxes for the three months till your property sells on the Land contract. Total may not exceed $500 till an end user is in the property and they pay the taxes, insurance and you start receiving positive cash flow. Remember that under the service package fee and guarantees I pay any back property taxes due and any water liens and I exchange the property is it is a burned property or land only.
The service package fee also covers the property signage where my road staff goes into the property, takes photos, checks the condition, surveys neighborhood rent and sale prices and places a new combination lock box, and post a For Sale sign in front of the yard. It also covers the 800 number expense placed on the sign outside the property.
8) After your support team sells my property on a land contract can I just sell that land contract note at a discount and get a big cash sum instead of waiting for these monthly payments to come in through the 15 or 20 years?
Yes, you could sell that note for cash at a discount from its full value (also called face value).
A land contract note secured against the property with a face value of $35,000 producing an income of $325 a month for 20 years is very valuable for many investors. You can post it for sale on our website for free.
The more payments you receive (9 or 12 months) on the land contract note the more valuable it becomes. It is the proof that the end buyer is performing on the note (it is called a seasoned note when payments have been made for a few months). After 3 months of receiving these payments the note has a good value. After 6 months it has a better value but after 12 months the note is truly seasoned and it would have the most value because the end users/buyers likelihood of default diminishes exponentially.
Here is a scenario to clarify: Say you bought the property at $19,000. It took 4 months (longer than usual) for the support team to sell it for you on a land contract note and the property sold for $35,000. If you collect the payments for 8 months and then post your land contract note for sale at a discount (its face value is $35,000 and it has a 6 months seasoning period) you may get apx. $23,500 cash offer. You would realize a gain of $4,000 plus 8 months of $325 payments coming to you (income) so an additional $2,600. That is a return of $6,800 in 12 months on your $19,000 invested. This is over 33% return cash on cash!
9) Why are these REO’s so inexpensive and what is my purchase minimum?
They are purchased in huge bulk packages directly from the bank in an “as is - where is” condition throughout the mid-west. Our partner had to commit a huge sum of money and show proof to the banks that we have experience and can service them and can also extend our services if we sold them to other investors.
I usually require a minimum of five properties to be purchased in a mini-bulk package. As stated above we now sell the investment properties individually and still waive the SSP fee.
10) How long do you think it should take from date of purchase to have property under a land contract sale producing cash flow?
Usually 90 to 120 days. Almost 80% of the properties sell on a Land Contract note within 90 days
Once you buy the property it takes approximately 45 days to get the signage and photos taken with the neighborhood survey and then my staff gets a lot of calls from potential buyers so it gets sold within less than 45 more days due to the attractive terms offered.
11) Who does the marketing?
My road staff in the Midwest places a For Sale sign outside the property with an 800 number forwarded to my office staff. My office staff takes all calls and qualifies potential buyers. The signs have attractive terms: i.e. $500 down and $325/mo. (lower than rent for similar homes in the neighborhood)
This helps create demand for the property to sell it fast.
12) Do I have to pay a real estate commission along with the support package when I sell?
No you do not have to pay any real estate commissions. My staff provides the service as part of the sale price at this time so I can make it a turn key, hassle free, income producing opportunity.
13) What kind of income should I expect?
For a total investment of less than $21,000 per property you should easily receive $500 down and a monthly income of $325 (conservative estimate) which is aprox. 18% cash on cash return. Please keep in mind that the buyer pays taxes, insurance and maintenance. (This is a NNN deal in residential real estate- NNN is a term used in commercial real estate where the Tenant, usually a national company, pays taxes, insurance and maintenance). In this case it is a residential home sold in as is condition and the end buyer makes the payments with taxes, insurance and maintenance)
14) Why are we using a land contract?
In almost all the states in the rare case of default the service company will hire a local law office (usually cost less than $700) to “evict” occupant(s) because they are in default on their contract (the land contract for deed) instead of foreclose if it was a regular sale with a note carried back. This gives you more legal power, faster turn around and less hassles. It is important to note that if you did a good job not only in qualifying the buyer but in making the payments and sale price reasonable, the buyer will keep paying as their chance in owning the property increases in their eyes over time. The likelihood of default also decreases tremendously after 90 days.
15) I heard that there was a bill in the senate that will prohibit seller carry back financing. Is it true? Do you think it will pass?
Yes it is true. I don’t think it will pass. Even if it does pass it will take effect starting 2012. I feel that the REO opportunity will be over by that time. This is a very limited opportunity in time, price, locations and structure. Those who will take advantage of it could have huge positive cash flows for a long time to come (these notes are usually 15 to 20 years when we set them up)
16) What is the worst-case scenario?
If you get a property and then a few weeks later we find out it is burned to the ground or it is a land only property and there is no house there. In these cases I provide an exchange guarantee. Within 5 to 10 business days I exchange it for another one. (I am working with other investors that buy these land only and burned properties to rehab them which is not my business model for the Midwest)
17) What kind of buyers call in?
They usually do not have high income or the best credit but need a chance to rebuild their credit and own a home. They love the opportunity to own a property and build equity while improving their credit. My staff checks their credit, their rent payment history and employment income to make cure they can afford the easy terms offered plus the tax and insurance monthly (The goal is to still have their payment with interest, tax and insurance lower than the rent they have paid for the past year or so.
18) Can I choose to NOT sell the properties and just rent them so I can enjoy the upside as the market comes back in the next couple years?
Sure you can but remember that when you get the sales/service package and my staff ends up selling your property on Land Contract, the price is much higher than your original purchase price so you end up with a nice built in profit with secured monthly income and unlike a rental the end Buyer pays for the property taxes, insurance, maintenance and there is no need for a management company to manage it for you.
19) Who makes the decision on the choice of buyers?
The service staff gets all the calls and qualifies the buyers then sends you the paper work based on our agreement to expedite the sale. You chose to sign or ask us to get you another buyer.
20) Who will do the Land Contract and paper work?
I have all that arranged for you with the legal contracts approved nationally that are fair for the buyers but protect you as an investor.
21) What happens after the property is sold on a land contract and the buyers are making payments?
I always suggest for the Investors to sign up with a National Note Servicing Co to collect the monthly payments for all the properties including taxes and insurance then they deposit the money into each investor’s bank account and send an email confirming money received and amounts deposited. As an investor when your property is sold on a land contract you will receive in the mail the land Contract with the Buyers names and you should sign it and notarize it then send it back to my office but in that package you will also receive a form to sign up with the National Note Servicing Co.
22) What if the buyers stop paying?
You can email me at LARealEstateDeals@me.com and I will have my staff retain a local law firm for you (cost is apx. $450). The law firm will process the eviction. You can always contact the end buyers directly prior to this process. Once defaulted end buyers are evicted you may retain my company to resell the property for you on a land contract (for $1,500) or you may list it with a realtor. Or you may chose to sell it yourself as a For sale by Owner.
23) What if after I sold and carried the land contract note I do not want to keep getting the cash flow and would rather sell the note?
You can market your note directly to other investors and any title company can assist you in transfer the note. You can always use our website and post your notes on the section that is designated for that so other investors could see it and buy it from you at a discount. This could be very profitable for you as you would be collecting more than what you paid for the property along with all the payments that were made to you. This can potentially make your yield closer to 50% on year one.
24) How soon can I start?
From the time you email me requesting the current REO list to the time you sign the contract and officially have your properties assigned for service is usually 2 or 3 business days.
25) How does the process of buying work?
I send you the list of REOs and a contract. You get back to me asap on the ones you chose. (Make sure you selected more than you want so I can see what’s available and hold it for you). Then I forward the contract to you with the wiring instructions and the list of homes you have on hold. You wire the funds within 48 hours or the homes are released to other buyers. Once funds are received you will receive the copy of the contract signed along with a confirmation of funds received and an email explaining to you the steps support has started to take to sell your property.
Remember – you can also use your self-directed IRA/401k funds to be a part of this opportunity.
26) Can I buy the houses from you at less than $21,000 and flip them by selling them to someone else quickly at a higher rate?
Yes you can but you need to explain to the other investor/buyer that the property does not have the deed yet and it will take 90 to 180 days for the deed to arrive in their name. Just inform me by email showing in writing the new name so I can have my staff prepare a deed transfer form into the new buyers name to be recorded when the deed arrives.
27) How can I prove to someone that we own the property when there is no deed and we can’t take title yet?
The contract spells out the fact that these are REOs and the banks take up to 6 months to issue the deeds. I can Sign an affidavit of sale as proof of ownership if that helps you (cost is $45) it is notarized and shows that I am the owner of the entire bulk package including the homes you are interested in.
28) Can you run out of inventory?
I believe we should be in good shape till end of 2011 but as you know the market will recover soon enough and these prices will probably never be seen again in our lifetime!
29) What are the absolute worst-case scenarios that can happen? And what could be the solutions to each?
a) The area where you purchased your REO at less than $21,000 when it is worth at least $35,000 gets a bunch of more foreclosures that drop the market values to $23K.
Solution: You bought it so inexpensively that you should still come up with profit albeit they may be reduced
b) The REO property you purchased is in a very bad neighborhood and in an un-sellable condition.
Solution: My staff usually finds buyers that will accept the property as is where is by lowering the sale price. At worst case they can get you some maintenance people to fix the basic items in the property to make it sellable. And you can still come out ahead of the game with profit. This is very rare as I purchase a higher tier of properties hence the guarantees I provide with the Sales/Service package.
c) The REO property you purchased is out in no man’s land and there is very little demand so it may take longer than 90 days to sell it and all you can get is what you paid.
Solution: My staff can make the terms so good that buyers would want it because the payments are low enough to get them interested and committed to buy the house. Even if you carried a land contract at the price you purchased the properties at (it has never happened before- but just in case) your interest rate is usually 9.9%, which is much better than having the money sit at the bank at 2 or 3% interest .For the record I have not had any such bad sales and to date all Investors have made decent returns on their land contracts sales.
30) Can you send me the list of homes I can choose from? And what do you recommend when I choose a property?
I am happy to send you the list of homes so you can chose the ones you like. Frankly it does not make any difference because no one really knows how they look like until I send the team over to break into the property and take photos, survey the neighborhood, look at the condition of the house and place a For sale sign outside based on an attractive down payment and a low monthly payment. My suggestion to you is chose a few more than you need because usually the list is sent to two or three buyers at the same time and there is often an overlap of the selected properties. For instance if you want to buy 10 select 15 just in case someone else selected some of the same ones.
31) I live in California, should I buy these in my name?
You need an attorney and a CPA to answer this question but most of our buyers are from California and they buy in their name then they have 90 days to set up an entity in Nevada like a C Corp with a separate Federal Tax ID number and a separate bank account in Nevada. Since the properties are outside California they feel that this set up will protect them and help them minimize their taxes. The properties then sell on a land contract and the income goes to the Nevada entity’s bank account that they draw expenses against it or borrow from it etc.
32) Can I see the photos of the properties before purchasing them?
No, but within 45 days after your purchase we have the team dispatched to do the signage package whereby they take photos, put the combination lock box on the door, survey neighborhood for prices, check property condition and place the For Sale sign outside based on competitive and attractive down payment and monthly payment with an 800# forwarded to my office.
33) If you survey the neighborhood and decide on a specific low down payment and an attractive monthly payment that beats the rent prices, how do you come up with the sales price?
My staff sells the properties as is where is to buyers that do not have a high credit score but would like to own a piece of the American dream. Owning a home for them is a matter of affording the monthly payments plus the tax and insurance. So we make the payments as low as possible (same principle of car sales) to attract these buyers and close within 90 days or less from your purchase date.
What we do is back up the numbers by figuring out at XX monthly payment (that is competitive to the neighborhood rent), at 9.9% interest for 15 or 20 yrs. What would the selling price on the land Contract? And I come up with the amount of the face value of the land contract note.
For instance if I sell a property at $325/mo for 20 years at 9.9% interest with 500 down you would back up the numbers and see that the selling price (face value of your land contract note) would be $34,410.49
If I sell the property at $350/mo for 15 years at 9,9% interest you would back up the numbers and see that the selling price (face value of your land contract not) would be aprox. $33,256.33
I decide which price to choose based on the length and interest rate provided the main obstacle has been overcome which is whether the buyer can afford the monthly payments plus tax and insurance. (This is determined by checking their income and rent payments for the past year- Their credit score is secondary)
Here are two websites that calculate the loan amount by backing up the numbers using the monthly payments, interest rate and number of years loan is amortized.
http://www.premiermove.com/loanamountcalculator.html
https://www.unionbank.com/company_information/hidden/financial_tools/loan_paymentcalculator.jsp
34) Can you show me a sample minibulk package results of 5 properties? How much they sold for? How long it took? And what was the interest rate?
2112/2114 Delachaise, New Orleans LA
Sold in 73 days
Sold for $29,354.00, 16 year mortgage @ 9.9%
Monthly mortgage payments are at $300.00
107 Paisley Drive, Williamston SC
Sold in 123 days
Sold for $56,206, 20 year mortgage @ 11%
Monthly mortgage payments are at $575.00
310 E. Trail St., Jackson MI
Sold in 67 days
Sold for $41,796, 13 year mortgage @ 9%
Monthly mortgage payments are at $450.00
1079 Arlington Ave., SW, Atlanta GA
Sold in 74 days
Sold for $40,227, 10 year mortgage @ 10%
Monthly mortgage payments are at $525.00
2301 Commercial Ave., Mingo Junction OH
Sold in 82 days
Sold for $31,881, 9 year mortgage @ 9%
Monthly mortgage payments are at $425.00
35) If I have other questions can I email them to someone for a quick response?
If you have any other questions please do not hesitate to email founder directly at LARealEstateDeals@me.com
SUMMARY:
· Single properties can now be purchased at less than $21,000 each.
o Properties are purchased lien-free by investor
o Cash or self directed IRA/401k funds may be used.
Sales Service Package fee of $1500 has been WAIVED, so we sell the property for you at NO COST. The SSP package includes all the work below.
· The sales/service package built into the price with no further fees to the investor.
o Replacement Guarantee (for any burned or land only properties)
o Research market area for local rents, values
o Market property – photos, combo lockbox, for sale sign with 800#
o Interview potential buyers
o Generate Land Purchase installment Contract between investor and buyer
o Deposit monthly payments to investors account (includes tax and insurance)
o Free website posting to find Discounted Note Buyers
o All re-cap paperwork sent to investor
