A Pactrust ™ Deal Part (5 of 5)
Over the past four weeks we have looked at out a Pactrust ™ deal starts. This week, we will how to close this deal up.
May 1st:
The resident co-beneficiary brings the rest of his money to Escrow, signs all documents, makes his first payment on the contract and is given the keys to the property.
May 2nd:
The deed to the trustee is recorded; a triple-net lease agreement between the Trustee (PAC) and the resident beneficiary is executed and the resident-beneficiary moves into the property and/or starts his work on the property (i.e., “takes possession”).
All signed documents are sent to the trustee, who retains the collection service who sets up the transaction and begins payment collections and disbursements for the term of the agreement.
May 4th:
I receive a check in the mail for $5,000, less the cost of Escrow, title search, IRS filing fee, and a one month Contingency Fund (to be used to kick the co-beneficiary out if I ever have to)
Now, when the trust and the accompanying lease agreement terminates, the property will be sold; all costs of sale will be paid; I will get back the equity that I carried (the difference between the loan amount at start and the $160K the resident came in at; the resident beneficiary will receive a refund of his $5,000; and all remaining proceeds will be divided between the resident beneficiary and me.
August 22, 2001:
So far (2 years into the deal), that property has increased in value to about $210,000; I receive a $100 positive cash flow each month; the loan has paid down by about $3,600. I therefore have earned approximately $33,000 on an over-encumbered property that no one else wanted, and which involved No Down Payment, No Credit Application; No New Loan; No monthly payments; No management; No maintenance, No up keep or refurbishment costs. Furthermore, the lender’s Due-on-Sale clause was not violated; the property is protected from credit and tax liens, bankruptcies of any party; marital dispute actions of any party’s spouse and Probate should any party die.
Cool, eh?
Bill Gatten
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