Are There Cool Tricks in Real Estate #17
Bill Fairman (00:03):
Hi everybody. Welcome to the show. By the way, my name is Bill Fairman and I am with Carolina Capital Management. I always forget to tell people who I am, which is not real bright for someone that is in sales, is it? So, make sure you like and share. We have other videos available either up or to the side or down depending on the platform that you are watching from. So, we always get a lot of frequently asked questions. Here is one that I love. What are some of the coolest real estate tricks you know? Well, really, there are not any tricks. It is all about just being creative and figuring out the pain points of the seller and what will work in your numbers and in your goals or perhaps somebody else’s goals. Because if it does not work with you, you can certainly take a deal that is viable and actually you either give that lead to somebody else or you know, you can also make money doing that.
Bill Fairman (01:06):
I like to just do the networking part. If I can help you, then later down the road you can help me with something. But, one of the things I like to do on rental properties specifically is being able to do what is called a subject to purchase, where you are buying the home subject to the current owners financing. So, if you are doing that on a rental portfolio, and as we know, rates are so low that if you are taking over someone else’s payments, you can arbitrage the difference between the financing that the current owner has and the payments that you are going to receive for rental. But you know, make sure you have to have plenty of reserves. You are the one that is now responsible for making those payments. There is one thing that has to be disclosed is that on every single mortgage note to a consumer, there is a clause, it is called a due on sale clause.
Bill Fairman (02:07):
So, that person can sell you that property. But that note holder, the bank, has the right and the opportunity to call that note due and payable upon the sale. Because they did not underwrite you, they underwrote the borrower that is now selling you the home. However, in all my time in the mortgage business, I have never actually seen a bank execute the due on sales calls. They are just happy that somebody is paying it, right? As long as you are making the payments, that is good. And you need to make sure that the borrower, or now the seller, signs a form that allows you to have permission to get the mortgage information from the current mortgage holder because they are going to send out updates. You are going to need to know what your payoffs are going to be. They change any payments, structuring your taxes and insurance are usually part of the mortgage.
Bill Fairman (03:15): So any updates if that loan is going to be sold to another lender, you are the one that needs to get all that information and they are not going to speak to you if you are not the one on the note. That if you have a form that is filled out that signed by the seller, that gives you permission to get any information that you want on their account. That is acceptable. So that is a great way to take over somebody’s payments. So essentially you are putting a little bit of money down and you are taking over payments and then now, you are going to rent the property out and you are keeping the difference between, you know, the rent and what the mortgage payment was ongoing maintenance and stuff is so that is a great way to do it. You are not having to buy and turn around and refinancing.