"May you live every day of your life."Jonathan Swift
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Those new to real estate investing often fail to take action because they don't have much cash. The truth is that the very best investors got their start when they had little or no money.
When you start at the bottom you have to work harder and smarter. You have to make every penny count... and in doing so you learn how to put together the most profitable deals.
Right now one of the very best ways for newbies to get started is to buy property by taking over the payments of an existing loan. It's called buying "subject to" existing financing.
The new investor can generate income to make the mortgage payments by quickly leasing the property. Lease payments often will cover the mortgage payments.
Here's something most investors overlook when buying "sub2" and why they lose around $1,000 each time they do a deal.
We often buy properties "subject to" the underlying mortgage. That simply means we give the motivated seller a little money (if he is really motivated no cash is needed) and take over the payments of the loan that's already in place.
We have title to the property, but the seller's name stays on the mortgage loan.
This a popular way of buying property from motivated sellers. It allows the investor to buy many properties with very little cash. It also places a severe responsibility on the investor to stay current with the mortgage payments. You must be a good landlord and keep the rent payments rolling in.
Here's where most investors fail to pick up that one thousand dollar that is just waiting to be claimed.
When the investor sells that property they often are not aware that they can get a check from the original lender for the cash that has accumulated in the loan's impound account.
That is the money collected monthly by the lender to pay the taxes and insurance. It often adds up to around a grand or more and it's easy to get if you know what you're doing.
When you buy a property "subject to" the underlying mortgage, always get all the owners of the property to sign a Limited Power of Attorney giving you control of anything having to do with the property in the future. That way you don't need their cooperation later, when they've left the area and can't found.
Finally, after you've held the property while it appreciated in value, you are ready to sell and cash out.
When you have found a buyer and you are arranging the close, send the lender a request that any balance in the impound account be sent to you or your company. Always send along copies of the Powers of Attorney so the lender knows you have the authority to make the request.
Sometimes they will honor your request and sometimes they won't.
More importantly, instruct the escrow officer or attorney handling the closing of your sale to ask for the impounds. They will give the pay off instructions to the lender and the lender usually will follow those instructions without question.
On a recent deal we received a check from a lender for the impounds in the amount of $1,357.00. Yeah!.. Happy dance!
Was there a catch? The check from the lender for the impound funds was made payable to the two original sellers whose names were on the loan. It looked like this...
Pay To The Order Of: John J. Seller, Paris W. Seller c/o The Author's Investment Corp.
Was that trouble? No! Remember we had a separate Power of Attorney for each of these individuals. We took the check and the POAs to our bank. We explained the situation and here's what the bank officer had us do...
On the back of the check, we signed the name of each seller. After those signatures we wrote:
By_________________ (and signed our own name).
Then we signed our company name and again (By______) and then we signed our own name and position in the company.
That was it! An easy way to pocket $1,357.00 that too many investors leave on the table.
Now YOU will never walk away from that extra thousand or so dollars!
About the author:
Mark Walters is an Investor and manager of the Real Estate Investor Base Camp at http://www.CashFlowInstitute.com
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Italy PM Monti defends tax authorities as protests mountReutersROME (Reuters) - Italian Prime Minister Mario Monti faced protests and catcalls on Saturday as he defended tax authorities against attacks fuelled by his government's unpopular austerity measures. Monti's speech to a passing-out parade of new officers ... |
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