There are a lot of people these days who are late on their payments and have no equity in their home or are upside-down on their mortgage. Here is how you handle those situations.
Six Month Mentor Program
Read Joe Crump's Blog:
Joe Crump's website:
Read the Transcript:
You can help people who are late on their payments and still make money on the deal for yourself. It's been working for us for many years. Here's how.
"There are two scenarios that I've come across when talking to sellers. Number 1: What happens if someone is behind in their mortgage payments? Is there a way to help them by selling the home rent to buy with the tenant?" -- Kim, Los Angeles
Joe: She's talking about the "For Rent Method" where we use the lease option memo and we tie up the property to buy it with a rent to buy that's assignable that we then assign to a new buyer and take the lease option fee, the first month rent goes to the seller, we're in and out of the deal, we make a chunk of money, then we're done. That's what she's talking about here.
Joe: But, she's talking about somebody who's behind on their payments. You don't want to do this with a buyer if that person is behind on their payments. So, they need to get current on their payments. There is a possibility that you could come up with their late payments out of your lease option fee but that'll dramatically reduce the amount of money that you can get to do that deal. I don't usually do deals like that, but you can look at that and decide for yourself.
Joe: You can also have the seller talk to their mortgage company and see if they can get a loan modification, which is becoming more and more difficult these days for them to do, but it might be possible for them to bring it current and then make the payments over time. That way, you'll protect your buyer in the transaction and the seller will be back on track and get their credit straightened out over time. It's a real benefit if they can pull that off. But, if they can't, I wouldn't spend a lot of time with a deal like this unless you can get it substantially under market value.
Joe: Remember, there are only two ways that you can make money in real estate as in investor: one is that you buy properties substantially under market value for cash, and two is that you buy properties that are closer to market value on terms or even above market value in some cases. If you can buy it on terms, then that means you can sell it on terms. If you buy it for cash, you can even do an assignment for cash if you can get it low enough in price.
Joe: But remember, the person you sell it to has to come up with cash, and that makes it more difficult for them. It means you have fewer people that'll buy that property. So you want to focus on properties that you can sell on terms most of the time because it'll make it easier for you to sell. We know this about a property on a lease option that's properly priced, not just the purchase price but the actual monthly payment, which is much more important than the purchase price.
Joe: The purchase price can be high, but the monthly payment has to be in line with the market rent for that property. If you're over that, it's not going to sell. But if you're in line with that, and you use the techniques that I teach to sell, using Craig's List, signs in the yard and those types of things, to get it sold, that property will sell in 30 days or less, and usually in just a couple of weeks. If the monthly payment is high, it will not sell at all and you'll have to get your seller to get their monthly payment down because they'll be competing with other properties.
"If someone is upside down with their property value by $150,000 -- Let's say the seller wants $500,000 but the current market value is $350,000. In one of your CD's you say that you can give the seller the sale price of the property they want of $150,000 more than market value today, if they agree to a longer term on the lease option like 5 years. My question is, how do you know how much above the market you can go with the sale price, and how much longer do you need to extend the term by? Is this something that one becomes more comfortable structuring the longer you're doing deals? Right now it seems so arbitrary. Or does the market naturally dictate what you can and cannot do with regard to structuring the deal (meaning if it's too priced high, no tenant buyers will respond to my marketing of the property)?"....
To read the rest of the transcript and more of Joe Crump's articles, click here: http://joecrumpblog.com/how-can-i-help-sellers-who-are-late-on-payments-or-upside-down-real-estate-investing/?utm_source=Youtube&utm_medium=EndLink&utm_campaign=Youtube130813