Florida To Invest In?
Hi Everyone.
I am a newbie doing due dilligence.....studying my niche (L/O, Subject to, Quit Claim and Contract 4 Deed), Financial Management aspect (LLC,vs LP), target market (landlords, FSBO's,Pre-foreclosures), finding an accountant, RE Atty, escrow company etc,etc......Alot of details!? Anyway, I am looking to start in Florida, though I live in Vermont. Vt is where I make my income but will relocate back to Fla to be close eventually. Two quick questions....how can I setup a deal where I buy low and sell high with the seller and tenant/buyer not realizing the purchase price at closing. Credit is shot to hell and back, so I can't realistically consider a loan,so I need to negotiate deals where MY seller, and MY future tenant/buyer will close amongst themselves without them seeing what I bought the property for vs what I am selling it for....I was thinking of a quit claim to L/O or L/O sandwich or L/O w/ assignment.....What is the anatomy for this? The 2nd question regards these hurricanes in Florida....How do you folks think it'll affect the RE market in Fla? I am hearing people now want to sell, sell, sell....does that make it a good buyer's market with all the disasters?
C.Q
I live in Florida and have for many years. I doubt the hurricanes will have much of an effect on property values although insurance is sure to go up. However, if people are dying to sell, then you are bound to get good deals.
Thanks for the response, although more importantly, I'd like someone to respond to the question of as to how to close a L/O deal as the middle person but w/o the seller and tenant knowing about the price bought at vs. price sold at....AT CLOSING TIME. I cant get conventional financing so I am looking at being a real estate controller for now.....
I haven't done this, but if you are buying on a lease/option from a seller . How would any future buyer know what you got it for? They wouldn't unless when you buy the house you get the title and it is recorded. Are you planning on taking title?
So do you just plan on finding a seller and then doing like a wrap lease option?
I sugesst doing a lease option with a seller then sell the option to someone else at a higher price.. Then, you would make the money on selling the options and the price of the house wouldn't matter cause the buyout price would be the same for whoever has the option to buy
Hello Devitt23 and everyone else.....
And thank you for responding.......Well, regarding the lease option wrap....to be honest I am not quite sure YET how to go about it and obviously, that's why I'm here. As mentioned before, I have bad credit so if I lease option from a seller, I highly doubt I'd be able to get financing so what I wanted to do was get a L/O from the seller for, say, two years, get a tenant / buyer to move in instead of me, and sell it to MY tenant / buyer within the first year. If that deal falls thru, then of course, I have another year left where I can get another tenant / buyer. So essentially the close would be between my seller and my tenant / buyer. Is this considered an assignment L/O or a wrap L/O? I am NOT sure what a wrap L/O is. Of course, in my simple mind, I'm thinking I will ask the tenant / buyer for higher rent, higher option price, and higher purchase price. So once again, how can I close without the seller and the tenant buyer knowing all my inside business. I want to keep the house, rent it out, and sell it to someone instead of getting a L/O and immediately selling my L/O (called an assignment, right?). Someone please tell me if my thinking is making sense......
Thanks everyone
sounds like a great idea, however in some parts of florida you can actually log on to the property appraiser web page and find out when and for how much a property was purchased for, also I am an investor in miami and can tell you that should you have to go thru an eviction process your property will quickly become a dollar consuming alligator,
Please do not post feel free to email me! See forum rules![ Edited by JohnMichael on Date 10/01/2004 ]
as far as lease options I am not certain but I believe they get recorded at the clerks office(maybe), The idea sounds great in theory and I am sure it would work out great with a good tenant but can also become an alligator.
feel free to email me
Good Morning Sleeve396 and thanks for responding.....As you can see, I am looking to have control W/O ownership. I understand there are all sorts of websites offering savy buyers alot of info, and that's fine. If I can't avoid something, then I just cant, but what I am trying to avoid is a squabble AT THE CLOSING TABLE over the the buyer's and / or seller's purchase price vs what I got the house for. Make sense?? I often hear this is the NUMBER ONE factor of deals going bad for someone like myself....a person who controls vs. owns. I'm trying to find out if there is a legit way to have the seller and my buyer CLOSE on separate days or hours apart. Is the L/O option set-up I am referrring to called a WRAP or ASSIGNMENT?? I am not sure I understand the difference. Also, in terms of the eviction process, I plan on having TWO very separate contracts as to avoid (as best as possible) their claim to equittable title, have them understand on contract that, let's say, 2 late pmts cancels the option, and, of course, I'll do a credit check. Not wanting to be a hardball....I'd like to consider it careful planning.
If you used a mem/of/agree you do not
have to be at closeing.When you record
the above you cloud the sale same as lein attorney calls you ,how much your
lein is and you get check.(done)Have
a good day.
" If you used a mem/of/agree you do not
have to be at closeing.When you record
the above you cloud the sale same as lein attorney calls you ,how much your
lein is and you get check.(done)Have
a good day."
Thanks alot Joseph44 for the above advice. I'm starting to feel slight clarity. This "memo of agree" is foreign to me. Can you explain it just a little further. Does the closing still occur between selller and buyer together? Why does the atty call me? Memo of agree.....what are they agreeing to and who is agrreing to what? Is this done on a Lease Option? Sorry for all the questions but thanks ALOT!
Do not confuse a Memorandum of Agreement with a Performance Mortgage. A Performance Mortgage requires that you be paid as a lien-holder out of closing (not easy to get the Seller to agree to unless he's in foreclosure). A Memorandum is simply a statement that you have equitable interest in the property. I don't like Memorandums of Option (have to be signed by the Seller). I prefer a Memorandum and Affidavit, because it only requires my signature, and I don't need the Seller's permission to record (as long as my Option with him doesn't specifically forbid it). Anything that you will record must be notarized (in this case, your signature only) and must include the legal description. In states like NC, it is wise to record something every time (you don't want to record your actual Contract, in my humble opinion) to show that you are not acting as a real estate agent but are, in fact, an investor. The Memorandum clouds the Title and makes it difficult for the Owner to borrow more money on the equity.
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LOK,
Is the Memorandum and Affadavit one form or two. Could you kindly explain the difference in those and The Memorandum Of Option. If you have a sample of them or on on your website, please let us know. I appreciate your insite like lots of others.
td
It's one form. The Affidavit portion is your sworn statement that you have a valid Contract on the stated property.
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LEASEOPTIONKING!....
Is the following SOUND real estate thinking??....I get a L/O w/ low option and low rent for 2 yrs, record it, then w/ an assignment or a wrap (I dont understand which?...you tell me, please), rent it out w/ higher rent and higher option, sell it between my seller and buyer.....AND if I do it w/ a Performance Mortgage, then I get paid from the seller's equity, and I don't have to be part of the closing between seller and buyer. I would locate sellers in PRE-foreclosures, right? What's the diff. between a wrap and an assignment....I am looking to do something like SUB-LETTING my L/O while making money. Not selling my L/O right away.
Thanks for your input.....
An assignment is just letting the T/B take your place in the transaction. Both parties will know what you paid and what you sold it for. The T/B would have to come up with the difference in what you pay the Seller and what he owes you in cash (the remainder in a combination of Option consideration, possible rental credit, and/or a note if need be).
A wrap is not applicable if you only have a L/O with the Seller. You do not have the right to sell in that manner unless you have the Deed or have obtained owner-financing with no DOS clause (private Sellers who owner-finance can and do sometimes refuse to allow the re-sell of the property without being cashed out). Here is how a wrap works in its simplest form: Seller has a house with a FMV of $100,000 with a $80,000 first mortgage that he owner-finances (or uses a Land Contract) for $100,000 with $5,000 down at 6 percent interest. The Seller has wrapped the existing financing. The Buyer could then re-sell it for $110,000 at 10 percent interest with $10,000 down (maybe to someone with less-than-perfect credit). You collect a down payment and monthly cash-flow based upon the higher sales price and higher interest rate. When it works, it's beautiful; when it doesn't, it can get ugly.
The most common way to do these is to L/O from the Seller, L/O to the T/B, and do a simultaneous close. A Performance Mortgage isn't easy to obtain.
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It doesn't need to be a preforeclosure. My best deals have been nice homes in nice areas with no needed repairs or behind in any paytments. Still, they are motivated. These Sellers can afford to make those payments, but they would rather not do so any longer.
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Great LeaseOptionKing!!
So clearly, for me at this time anyway, a wrap is NOT what I need. With an assignment, can I L/O out to a different T/B FOR ATLEAST A YEAR so that MEANWHILE, I am making money by asking for higher rent (I would apply the T/B's credit by lowering the purchase price by X much on contract),also making money by the difference in purchase price at the end of a year, and the option price. Or are assignments SOLD ALMOST IMMEDIATELY. My goal is to HOLD the property so that I can make money over the course of the L/O agreement. Perhaps, I am complicating things and what I should do is get a L/O and then assign it out within a quick few months, but how? Where do I make my money in a quick transaction like that. Man, I am so hoping I am making sense....Look forward to response!
Thanks LOKing!
You can lease it out as long as you want--so long as the expiration of your Option with the Owner doesn't come before the expiration of the Option with your T/B. You can assign it at any time or just go on Title with a collapsed closing.
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Thanks SO much for your Input LeaseOptionKing as well as all the other folks who responded.
....
I have JUST one last question on the assignment issue....atleast for now
So I L/O to another T/B for one year but, of course, my L/O is atleast 2 years. On these assignments, do I legally make my income from higher rents than what I pay my seller, higher purchase price than what my seller and I agreed upon, AND higher option price??? Increased income from hIgher rent and higher purchase price makes sense to me, but how do I make income from higher option price?
Thanks Ya'll....My first time seeking advice from this forum, and it's WELL appreciated.
Let's say your Seller wants $1,000--you would just collect 5 percent down from your T/B, and pay your Seller $1,000 from that.
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OK LeaseOptionKing.....I understand your statement but I am supposing I would NOT be able to profit from the difference in option price because at the end of the deal with MY T/B, I MUST give him/her credit in some form for the amount (5% - as your example) of the option they've paid, RIGHT? There's no money that I can pocket from the option price end, CORRECT? So, in essence I don't profit per say; I just can avoid paying an option on my end...Am I correct?
Thank You LOK.......
You profit, brecause you get 5 percent up-front. Yes, you have to credit it to the T/B (comes off what the T/B owes you), but you get that 5 percent based upon tomorrow's value. With the Seller, we pay today's value (or below), and if the Seller's primary problem is debt relief, we probably won't have to pay much Option money at all. Your profit is your profit, but it's divided in three paydays: Option money, positive cash-flow from rental income, and the back-end.
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LOK,
Do you have a sample Memoradum of Agreement you could share with us. If not, is it in your course?
Thanks,
td
On 2004-10-01 12:31, LeaseOptionKing wrote:
Do not confuse a Memorandum of Agreement with a Performance Mortgage. A Performance Mortgage requires that you be paid as a lien-holder out of closing (not easy to get the Seller to agree to unless he's in foreclosure). A Memorandum is simply a statement that you have equitable interest in the property. I don't like Memorandums of Option (have to be signed by the Seller). I prefer a Memorandum and Affidavit, because it only requires my signature, and I don't need the Seller's permission to record (as long as my Option with him doesn't specifically forbid it). Anything that you will record must be notarized (in this case, your signature only) and must include the legal description. In states like NC, it is wise to record something every time (you don't want to record your actual Contract, in my humble opinion) to show that you are not acting as a real estate agent but are, in fact, an investor. The Memorandum clouds the Title and makes it difficult for the Owner to borrow more money on the equity.
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Sure, since I own the intellectual rights to it. Copy and paste into Microsoft Word; leave a three-inch margin at the top for recording purposes and no margin at the bottom. It should be exactly one page. After "to wit" insert the legal description. You sign as the Affiant. Your Signature must be notarized.
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MEMORANDUM AND AFFIDAVIT OF EQUITABLE INTEREST
BEFORE ME, the undersigned personally appeared, _____________________________________, who after being duly sworn deposes that he/she has equitable interest in the following described real estate in _____________________County; to wit:
Also known by street address: _______________________________________
An Agreement was entered into by and between the undersigned, _____________________________________, as Buyer and _____________________________________, as Seller, on this ______ day of _________, 20____.
A copy of the Agreement verifying the equitable interest of the undersigned may be obtained by sending a request to _____________________________________, whose mailing address is _______________________________________ and whose phone number is _______________.
BE IT NOTED THAT ALL LENDERS AND THIRD PARTIES ARE HEREBY PUT ON NOTICE AND DULY WARNED THAT ANY MORTGAGES, LIENS, OPTIONS, OR PURCHASE AGREEMENTS OCCURRING SUBSEQUENT TO THE DATE OF THE AGREEMENT SPECIFIED IN THIS AFFIDAVIT ARE HEREBY DECLARED BY OWNER OF RECORD TO BE NULL AND VOID AND OF NO LEGAL FORCE AND EFFECT. ANY SUCH THIRD PARTIES MAY PROCEED AT THEIR OWN FINANCIAL PERIL.
WITNESS the hand and seal of said Affiant this ______ day of _________, 20____.
______________________________________
Affiant
State of _____________
County of _____________
The foregoing instrument was acknowledged by me this ______
day of _____________, 20 ____ by _____________________________________
who is personally known by me or who has produced ______________________
as identification.
________________________________ (SEAL)
Notary Public
My Commission Expires:
It didn't format exactly right; you may have to tweak it to get it on one page.
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LOK,
Thanks for you post of the Memorandum. You did not have to do that, but it goes to show that you are one of the good guys!! Thanks for all your input.
td
I could not agree with you more, TB. LOK is very generous in sharing with all of us his knowledge.......
LOK and everyone else.....
I am fumbling with numbers in trying to figure out how to profit with the option price portion of my L/O plan. Here's a tiny example based on your (example)5% option price:
MY seller is asking 5% (or even if it's less that 5%) option for TODAY's FMV of $75K = $3750.00
I ask TODAY for 5% option from MY T/B based on FUTURE FMV of $100K = $5000
The difference = $1250
That's how far I got. Not very far but I am thinking that the process goes as follows: I give my seller his $3750 (5% of $75K) from the $5000 (5% of $100K) I got from my (assignment)T/B. I pocket the $1250 difference. This is what happens on the FRONT-END. On the BACK-END (because, of course, I MUST credit my T/B) I LOWER my asking price of $100K to $95K. Still doesn't seem right because it seems as if what I'm doing is getting a QUICK $1250 TODAY for TOMORROW's (12 months) $5000. Which then ultimately translates into INITIALLY having to ask my T/B for an even HIGHER price (than $100K) on the house so that I can then profit from the difference in purchase price as well. I rather profit on the purchase price than on the option price (if I had to choose) cuz it's more money, of course.
My logic doesn't seem right because I think I'll compromise FMV and my ability to get rid of the house. Also doesn't sound like the right thing to do to a T/B but was just offering you my thinking process.
LOK and everyone else.....would you kindly expound on your original explanation?
gracias.....
You don't give 5 percent to the Seller. If they want 5 percent, they don't need us. We deal with Sellers whose primary motivation is debt relief, time constraints, or both. I usually pay nothing (or close to it). But I agree to pay their mortgage for them.
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[quote]
On 2004-10-06 19:39, LeaseOptionKing wrote:
You profit, brecause you get 5 percent up-front. Yes, you have to credit it to the T/B (comes off what the T/B owes you), but you get that 5 percent based upon tomorrow's value. With the Seller, we pay today's value (or below), and if the Seller's primary problem is debt relief, we probably won't have to pay much Option money at all. Your profit is your profit, but it's divided in three paydays: Option money, positive cash-flow from rental income, and the back-end.
LOK,
Your feedback as well as all others is much appreciated. And I apologize for being alittle thick here. This option profit is not clear for whatever reason cuz in my simple mind, 5% option I receive from MY T/B is something that I have to credit to him/her regardless of todays vs tomorrows value....in other words, I'm not seeing it as usable income. Unless, it goes into some interest bearing account, which I think I am way off now.
Your the Man, LOK....
I believe I understand. I hope so and if not; shoot me....(wink, & smile!)
Pretend I ask for 5K option. I can use it TODAY as I please and reimburse T/B at CLOSING from what T/B owes me WHICH IS........ the difference in purchase price between my seller and my T/B.......
BTW...I bought a manual on this stuff and it didn't explain these specifics.
P.S I realize all your help in answering my questions. I wish others would help cuz I feel like I'm squeezing you a bit...so again, muchas gracias.
LeaseOptionKing,
I apologize for asking this if you are already tired of answering the same question. I would appreciate it if you could verify if this is correct. I am just trying to get everything clear.
Ex. for Memorandum and Agreement: A seller has a property at 100,000 selling at FMV. The Buyer makes an offer for FMV. He signs a Mem & Agr., gets it notarized, records it, then turns around and sells to other Investor at lets say 110,000 (just an examlpe). Correct? Who will attend the closing.
2nd Question: Is this how you should flip a property or is it completley different?
To all you folks not living in hurricane-land, before you decide you want to retire in Florida and "make a killing selling real estate on the side," take a look at http://www.pensacolanewsjournal.com starting on 9/16/04 before you hire the moving van.
There might be some very good deals here, but the down side is risky. In addition, Florida homeowner insurers are now writing the deductibles as "2% of the replacement value." In my case, the deductible worked out to $4,440.00, and neither FEMA nor anyone else covers the deductible. FEMA only steps in if you are uninsured. And your leinholder is going to make very certain that you insure THEIR interests first.
Good luck,
Bob
China, you don't reimburse it to the T/B; you simply subtract it from the total amount they owe you IF they close--otherwise, it's yours and is forfeited by the T/B. --quote by LOK
I'm frustrated.....I know better than this.
My hinderance is WHATcan they possibly owe me at closing IF they close? My manual doesn't talk about this. I figure I would subtract, as an example only, 5K option from the purchase price on contract. Is that what you're referring to.
Sorry about this....I'll take you to lunch sometime for all your patience
All three would attend the closing (unless you sell/assign the Option). Seller signs Deed to you (goes in escrow), you sign Deed to the T/B (also goes in escrow), and the funds of the T/B are used to close both transactions. Lenders are getting wary of the collapsed closing; however many still advertise no seasoning, and even some of the apprehensive ones will consider it if you use an attorney with a good reputation (but they will look very closely at the appraisal). There are other ways to close, but this is the most common way to do a Sandwich Lease.
Is a sandwich different from an Assignment?
If I assign, then is the closing ONLY between my seller and assignment T/B?
Are funds used by T/B to close coming from the OPtion?
Yes.
Yes.
Don't understand this question.
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LOK.....
Thank you very much.....I got it!
Quote:
On 2004-10-09 22:26, bogie7129 wrote:
There might be some very good deals here, but the down side is risky. In addition, Florida homeowner insurers are now writing the deductibles as "2% of the replacement value." In my case, the deductible worked out to $4,440.00, and neither FEMA nor anyone else covers the deductible.
So Bob, you apparently were insured for $220K.
1.) What is the market value of your home?
2.) What is the value of the land?
3.) What would it cost to rebuild your home if it was completely destroyed?
Good questions, General,
1.) What is the market value of your home?
Based on a recent appraisal about $175K.
2.) What is the value of the land?
Don't know - right now I would say it's worth a bit more than it was before Ivan. It's inland, not in a mandatory evacuation area, not in the 100years flood plane, approx 1.5 acres.
3.) What would it cost to rebuild your home if it was completely destroyed?
Less than the appraised value, I'm guessing. 4BR, 3BA, hardwood/tile throughout, blt 1984, survived two hurricanes under 1984 building codes. Just gotta patch that small hole in the screenporch roof (I was VERY lucky.)
Make me an offer!
Bob 8-)
Good questions, General,
1.) What is the market value of your home?
Based on a recent appraisal about $175K.
2.) What is the value of the land?
Don't know - right now I would say it's worth a bit more than it was before Ivan. It's inland, not in a mandatory evacuation area, not in the 100years flood plane, approx 1.5 acres.
3.) What would it cost to rebuild your home if it was completely destroyed?
Less than the appraised value, I'm guessing. 4BR, 3BA, hardwood/tile throughout, blt 1984, survived two hurricanes under 1984 building codes. Just gotta patch that small hole in the screenporch roof (I was VERY lucky.)
Make me an offer!
Bob 8-)