Home Forum Contact Create an Account Sign In Create a Trust

some questions…

This topic contains 4 replies, has 0 voices, and was last updated by Avatar of newtexan newtexan 9 years, 7 months ago.

Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • #6615
    Avatar of newtexan
    newtexan
    Member

    Please clarify…I went ‘A Fortune in Free RE’ but I must have missed it.

    I’m trying to understand the default process – I think and ex will make it easier.

    (Property is acquired – I (Investor) have 100% BI).
    - Found a buyer with 10% initial contribution
    - Assign 50% BI to buyer and keeps 50% myself
    - Buyer contributes addition $100 monthly
    - MAV $100K
    - FMV at end of the lease $110K
    - Rent amount $1000/month
    - lease term 3yrs.

    What happens to buyers’ contributions (initial+monthly) if -
    1. he defaults on the lease (ie stop payments)?
    2. Buyer simply chooses not to buy at the end of the lease period.
    3. Buyer buys at the end of the lease for FMV
    4. Buyer finds another buyer who wants to buy for FMV during or at the end of lease because he wants out.
    5. Buyer finds another buyer who wants to buy for less than MAV during or at the end of lease because he wants out.

    Thanks for clearing this up.

    #33368
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    Welcome to NARS.

    Not that I don’t want to answer your questions but, all the answers are in the book, “A Fortune in Free Real Estate” and even more detail in the “BIG BOOK” as we call it (“How to Make it Big in No Down, No Credit, Real Estate”). It is an easy few hour read and I confident you will find the answers. You may want or have to read it again.

    I would also suggest that if you’re able, to attend one of Bill’s next workshops.

    Since you have multiple questions and as my time permits I’ll try to answer them over the next few days. But, please read the books.

    Fair Enough?

    #33369
    Avatar of newtexan
    newtexan
    Member

    Thanks :oops: – Fair enough!!

    #33370
    Avatar of newtexan
    newtexan
    Member

    I’ll take a crack at it – please correct me. Thanks.

    @NewTexan wrote:

    Please clarify…I went ‘A Fortune in Free RE’ but I must have missed it.

    I’m trying to understand the default process – I think and ex will make it easier.

    (Property is acquired – I (Investor) have 100% BI).
    - Found a buyer with 10% initial contribution
    - Assign 50% BI to buyer and keeps 50% myself
    - Buyer contributes addition $100 monthly
    - MAV $100K
    - FMV at end of the lease $110K
    - Rent amount $1000/month
    - lease term 3yrs.

    What happens to buyers’ contributions (initial+monthly) if -
    1. he defaults on the lease (ie stop payments)?

    RB forfeits all monies paid – initial contribution+monthly contributions

    2. Buyer simply chooses not to buy at the end of the lease period.

    Trust will be terminated – RB forfeits all monies paid

    3. Buyer buys at the end of the lease for FMV

    Trust terminated – Any amount over the MAV will be shared among the beneficiaries as per their percentage of BI after all contributions are returned.

    4. Buyer finds another buyer who wants to buy for FMV during or at the end of lease because he wants out.

    Same as (3)

    5. Buyer finds another buyer who wants to buy for less than MAV during or at the end of lease because he wants out.

    This won’t happen as the IB will most likely not give consent to the sale.

    Thanks for clearing this up.

    #33371
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @NewTexan wrote:

    (Property is acquired – I (Investor) have 100% BI).

    Not quite. Your offer will be to acquire no more than a 90% “Beneficiary Interest” in the Trust with the Seller/Settlor retaining a min of 10% as to not violate the lenders DOS provision and to not have the transaction classified as “a sale”. IOW, you do not acquire 100% interest. The agreement will be that the Settlor will relinquish their 10% at termination. At that time your RB will split any remaining “net” proceeds of sale.

    @NewTexan wrote:

    - Found a buyer with 10% initial contribution
    - Assign 50% BI to buyer and keeps 50% myself
    - Buyer contributes addition $100 monthly
    - MAV $100K
    - FMV at end of the lease $110K
    - Rent amount $1000/month
    - lease term 3yrs.

    You may certainly ask for 10% but typically we are asking and getting from 3% to 5% plus first month.

    Settlor 10%, IB 40% and RB 50%. Again, at termination the Settlor would relinquish their interest and the remaining beneficiaries will share in the net proceeds as agreed in the Beneficiary Agreement. It may be different in each transaction.

    Why would the RB (not a buyer), contribute an additional $100 per month. If you are referring to collecting some sort of cash flow it would be included in whatever the lease amount you have set or agreed to with the RB. It would include… PITI, HOA (if applicable), Monthly Trustee Fee, IB Cash Flow and any other escrows, etc.

    There are not two separate MAVs. The MAV at the beginning is the same MAV at termination.

    Again, the lease amount is whatever you have set that includes PITI, etc. as listed above.

    The lease will not and cannot be 3 years, as any lease of 3 years or more consitutes a sale in the eyes of the IRS. The lease will be a max of 2yrs, 11mo, and 29 days and will stay on a day-to-day hold over from then on no matter how long the trust is in place or written for. The Trust may be a 5 year trust but the lease is 2,11,29 then d2d.

    @NewTexan wrote:

    What happens to buyers’ contributions (initial+monthly) if -
    1. he defaults on the lease (ie stop payments)?
    2. Buyer simply chooses not to buy at the end of the lease period.
    3. Buyer buys at the end of the lease for FMV
    4. Buyer finds another buyer who wants to buy for FMV during or at the end of lease because he wants out.
    5. Buyer finds another buyer who wants to buy for less than MAV during or at the end of lease because he wants out.

    All Non-Recurring Contributions, regardless of who they are from, including the RBs initial contribution of whatever you ask for, are Fully Refundable, even if they default, walk away or evicted… MINUS a min $2000 default fee, all back rents, interest, penalties, costs of eviction, repairs (if any), re-marketing costs, etc. It is highly unlikely there will be anything left to refund. However, if there is, it is to be repaid via an unsecure promissory note over ten years at zero interest and only after termination of the trust.

    So, if you replace the RB with another and it lasts another 5 years or so, then and only then are you required to start making zero interest payments to the previous RB. Cool Huh!

    In 12 years and dozens rand dozens of EHTrust transactions I have only started 3 evictions and only had to complete one. The RB contributed $9800 but all the costs added up to $30,000. In most states the back rent and any estimated damages are X3 so it really isn’t likely there will be anything due to the former RB.

    The RB has the 1st Right to either sell or purchase the properrty, on or before the end of the term, minus anything due to them by the trust (ie, their contribution and percentage of net proceeds). they cannot buy or sell it for less than what is owed, including all the other beneficiary’s interest.

    Just as in any other form of transaction, the parties can agree to take less than their full interest or profits to make the sale happen. If not then the RB may remain in the property until there is sufficient equity to do the deal or just leave and return the property to the seller/settlor with payments current and in good condition. Of course ic they just leave all default fees and costs may apply who h may result in no return of their initial. contribution.

    I hope this helps and I’m sure you’ll have more questions.

    #33372
    Avatar of newtexan
    newtexan
    Member

    Thank your Scott! That was very clear – much obliged.

Viewing 6 posts - 1 through 6 (of 6 total)

You must be logged in to reply to this topic.

Posted in
Contact Form
Your Fullname:


Email Address:


Phone:


Best Time to Call:


Subject:


Your Message:


Security Code:

 

Can't read the above security code? Refresh