Wow, this thread has moved a long way since I last read it.

Leasebacks: Be very careful with doing leasebacks. I have an article around here somewhere (can't post it as it's copyrighted from a newspaper) that talks about investors going to jail for doing these the wrong way. The problem is, doing it the right way is very difficult.

Stated Income Loans: They aren't all "fraud" loans. As a self-employed investor, I have very little verifiable income. And it's certainly not steady income. But I know what I can afford and how much I expect to make on a deal. So when possible, I fund my rehabs with a standard purchase-money mortgage through a local lender. I always use a Stated Income Loan, because otherwise, we have to dig through tax returns, accounting records. And at any given time, it's very hard to verify the numbers. I also make sure we stay well below 80% LTV, which makes it safer for all involved.

Hard Money Loans & Foreclosure Bailouts: One thing to beware of when bailing out a homeowner in foreclosure is predatory lending law. Basically, if you know or suspect that the borrower can't afford to make the payments, it's illegal to make them the loan. A lot of vultures will make the loan (or set up a fancy trust agreement to disguise the loan) with the sole intention of foreclosing on the loan later, because they know that most will end up in default.

And it's not limited to small-time lenders. Ameriquest Mortgage just settled with 49 states + DC to the tune of $325 Million for engaging in predatory lending. The story was in the paper here yesterday . HFC almost went out of business a few years ago for the same things.

hey mike,
when you buy investment properties using stated income loans, are you putting any downpayment? also do you provide a CPA letter and documents stating that youve been self employed for at least 2 years?

theres a way to do a leaseback to the original owner and foreclosure bailouts using PACtrusts or EHTtrusts. you can have the seller become a beneficiary with a small percentage within the trust agreement and the investor as a co beneficiary with majority of the percentage in the trust. im not an expert on this yet, but im still doing my research on this - so please do not take this as legal advice.

Alvin,

I usually put 20-35% down. The downpayment and fix-up costs come from a home equity line of credit. And yes, I have a CPA letter (though I don't think the last two deals required it, for some reason).

thanks for the quick response. =)

are you leveraging the downpayment and fixup costs from other investment properties or your personal property? btw whats the median price for SFR in NH?

The people who went to jail doing it were evicting the seller/tenant for very small violations, and keeping all the equity.

Or in some cases, an investor brought the foreclosing loan current and took title to the property "subject-to" the seller's mortgage(s). They then sold the house back a year for a quick profit (say $50k). The homeowner complained by suing the investor. A judge decided that the entire transaction was really a disguised loan at 500% interest and ordered the house be given back to the seller and fined the investor. Not pretty.

My personal belief is that if you want to do a leaseback, absolutely bring in a new loan, close at a title company and buy title insurance. That way there is a neutral third party there to say "yes, they sold the house." Then, don't give them a real option to buy it back. Just let them make you an offer to buy later.

My ultra personal belief is that I don't let the sellers stay in the house anymore. Every deal I've ever done that's backfired in my face started with me saying, "Sure, you can stay!"

Right now, I'm leveraging my personal residence. It's not ideal, but as long as I don't go too nuts, it's not been a problem. I figure I can handle three properties at a time: 1 in rehab, 1 being sold, and 1 being bought.

nice.
how long do your projects take and do you sell FSBO?
also are you a handyman type of person or do your hire out to professional contractors to get the job done quickly while you oversee and look for the next rehab?

I hire a realtor, of course! The projects always take about twice as long as expected, even when things go well. We're about two months into one in Hinsdale, NH. Next week I'm starting another one in Concord, NH. That's the short-sale I recently bragged about in my newsletter.

Right now I have a 2-man crew, with a 3rd part-time guy. I help out a day or two a week, but I've spending most of my time this week getting my new web sites up and running.

send me your newsletter on short sales.

alvin@preferredvalleyhomes.com

alvin hi
just wanted to know about the seminar this weekend? Is there a cost ? do you have to go all days thanks I wanted to learn about OWC lease opt.etc

LL: i sent you a private message