WHAT WE DO AND HOW WE DO IT: These steps are for the passive investor, seeking a no down, no credit qualifying property acquisition
- Find a motivated seller who is overburdened by an unwanted property, and agree to take it off his/her hands…often, though not always, for a reasonable amount to be paid to you (i.e., never look for properties…’only look for motivated sellers: each one will have a property).
- When the property is located, rather than your taking title to the property, have the owner (for his/her own safety) place the property in a title-holding land trust, naming you (the acquiring party) as a co-beneficiary in his/her trust, rather than an owner of the property…
- A competent, licensed, bonded, non-profit 3rd-party corporate trustee is then named, that will be charged with holding the property’s legal and equitable title for a predetermined period of time (up to 21 years, or the length of the underlying financing, whichever is greater)
- At this point you and the owner-of-record decide how future profits are to be shared (i.e., in what percentage) and how your respective beneficiary interests are to be set, with the owner agreeing to hold at least 10% of the trust’s beneficiary interest for the term of the agreement. At termination it can be decided that this 10% can either forfeited to you, or it can represent a percentage of profit that the settlor (the seller) might expect to be paid when the property is either sold or refinanced at termination (‘all such stipulations are negotiated at inception).
- Once the trust and the terms of the Co-beneficiary Agreement are agreed-upon (i.e., ‘analogous to a partnership agreement), the you (the acquiring beneficiary) can now bring in a “buyer” prospect as a third co-beneficiary the trust. This party will then, under provisions of a “triple-net” lease agreement with the trustee, pay you your price for the privilege of that person’s having acquired a home without a down payment or credit qualifying…’and being afforded 100% of the fee-simple benefits of real estate ownership.
By using the ODWM EHTrust Transfer® in this manner one obviously avoids long and costly escrow, a Realtor® commissions, new title insurance, and the loan application and approval process. The entire, fully safer and secure, transfer of ownership can take place in no more than a day or two (‘assuming clarity of title and easy accessibility and responsiveness of all parties).
When in search of a property that you might acquire by any form of seller-carry (“creative”) financing, it is imperative that you spend adequate time (i.e., ‘a few hours, not days or weeks, as so many professional procrastinators do) exploring your options, your prospect-base and what investing parameters you feel are most important to you (i.e., long-term or short term-hold, fix-up and flip, developing massive income streams, etc..
Some important considerations:
- Determine the type of properties that appeal to you
- Check the geographical areas in which you are most comfortable
- Know the relative properties values and rental factors in the areas your working
- Determine the type of prospect you chose to deal with
- Plan out how you will reach your prospect base (i.e., by phone, direct mail, email, door knocking or…?)
- Know well your exit strategy throughout all phases of your prospecting, from offering and deal-structuring to terminating the transaction years later
- And most important of all…’have a competent coach and mentor…’no matter what! Never be afraid to copy a winner!
A key piece of advice in locating and acquiring income-producing real estate without large upfront expense and negative cash-flow, is to stop–before you start–and understand clearly that you are not, and cannot be all things to all people!
Even though we at ODWM collectively have solutions for virtually every problem and situation out there, there are simply some properties that are too-run down, too over-encumbered, and too far away…or ugly…to be a part of your manageable portfolio. As well, there are sellers of properties who are too rude, to arrogant and too desirous of being the proverbial “dog” and making you the “tail,” while they direct all the “wagging”…usually while holding the unreachable carrot in front of your nose (‘been there…’done that!).