Posted by Michael Morrongiello on May 05, 2008 at 15:45:04:
In Reply to: using paper for 'skin in the game' posted by cork horner on May 05, 2008 at 10:39:47:
Cork:
Here is one technique;If you have other properties WITH equity in them - then find a seller who IS willing to hold "Paper". Howeve have them hold the "paper" secured by the OTHER property and its equity INSTEAD of the property you are acquiring.
EG.
You currently own a home worth $300K with only $100K in existing debt against- thus current the LTV- loan to value is 33% ($100K of existing debt divided by / $300K FMV)
You find a distress seller of a property who IS willing to be flexible and does not need all cash.
Lets assume that home is a real ugly fixer upper you can buy for $100K but fixed up and renovated its worth in todays market closer to $200K.
You put down $10K and ask the seller to finance the balance of $90K by holding a purchase money mortgage to be repaid under negotiated repayment terms to be worked out.
However the $90K will be secured by your existing $300K FMV home (as a 2nd lien Mortgage) and NOT against the home you are acquiring for $100K.
Thus you now have used "dead equity" sitting in that other property to secure the seller financing.
Now you can rehab, resell, or borrow against the $100K home which will be valued closer to $200K once the renovations are completed.
If you do sell off the $200K home then you will have the immediate use of that cash while still not having to pay off the Note seller / holder in full on their $90K Note since it will be secured by the OTHER property pledged as collateral.
Just one of the myriad of ways proper knowledge of "paper" and some of its uses can come into play in this marketplace.
Other Note;
In the past some lenders were giving your a credit of $90K as if it were a cash down payment towards the financing of the property you seek to purchase simply because it was secured by other pledged collateral you owned. That practice may have stopped in todays tight credit crunch market but was going on until recently.Best to your success;
Michael Morrongiello
www.sunvestinc.com
Author of the following home study courses;Paper Into Cash - The Convertible Currency - How to Effectively Create Marketable Real Estate Notes
&
The Unity of Real Estate & "Paper" - Advanced techniques for both the acquisition and disposition of properties using Real Estate "paper"
- Re: Using other collateral.... cork horner 22:07:25 05/05/08 (0)