PERSONAL FACEBOOK DISCLAIMER: While an avid Facebooker indeed I am, I’m also admittedly not very good at managing my FB “inbox”, which is glaringly obvious from the screenshot below. So if you want to be FB friends, that’s great. Just ask and I’m game.  But if you send me a FB email, know that I may or may not respond, and please don’t take it personally either way.  Oh, and please don’t invite me to join the mob, leave useless trinkets or “blessings” on my wall, throw a sheep at me, ask me to join a vampire coven or to become fan of your friend’s weird band. I’m not into the games and apps -- I honestly just like seeing people’s updates and making snarky remarks from time to time.  Cool?

Having said that, here’s one I noticed that’s worth sharing…

So first let me just say, it seems pretty cool to have a first name that literally means, “a woman’s jeweled, ornamental coronet.”  I’m just saying…

Now I have to be totally honest here…

Tiara’s asking a great question, but my own answer can’t be authoritative. Why?  Because while I’ve wholesaled literally hundreds of deals in my REI career (and I’m certainly no stranger to email marketing) the fact is I’ve historically fed most of my deals to my “players short list”.

See, there’s two schools of thought on wholesale buyers lists:

• School 1: Get a big pool and fill it with as many hungry fishies as possible, drop in your bloody meat of a killer deal, and watch the feeding frenzy begin (often driven by email/fax marketing of some sort).

• School 2: Focus on building a “short list” of local “players” whom you know personally and whose criteria you understand implicitly, and call them up one at a time when you have a hot slice of something that should fit nicely on their plate.

Now I just happen to have come up as a “School 2″ guy -- because frankly a lot of the dealmakers I connected with early on wouldn’t even play ball with me if I tried to play “School 1″ with them.  I tried briefly, and they actually got offended.

BUT WAIT!  THERE’S MORE!…

…I also just happen to have more than a few “Option 1″ buddies who’ve done very well for themselves.  And the fact is, there’s no right or wrong here.  It’s just two different approaches, and lots of folks have done very, very well with both.

So I went to one of my “School 1″ friends Darren Dicke (3 time college dropout, 6 figure wholesaler, and true master at flipping deals via email) and asked him to share his thoughts.  He was actually nice enough to record a video response for us, set to the Black Eyed Peas…Enjoy…

A Couple of Quick Things…

First, got any more questions about email marketing your wholesale deals? If yes, chime into the comments below and I’ll see if I can wrangle Darren over here for some follow up.

Second, if you’re doing deals, I’m interested in hearing how YOU flip most of YOUR deals.  Would you share a bit?  Are you a “School 1″, a “School 2″, a hybrid, or something else entirely?

Thanks for tuning in,

a

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Yes, hard money lending is less risky than owning real estate!

Think about it.  Done properly, your loan will be secured by real estate worth much more than your loan.

Personally, loans I make are no greater than 60% of the fixed up price of the property. And if there is much fix-up to be done, I escrow the repair funds and provide draws only as the work gets done.

As a hard money lender, you will only loan on property you would not mind purchasing for the loan amount the day you make the loan. That way you will not mind taking over the property if the borrower defaults. Therefore, you will not make loans on property or in areas you do not feel comfortable.

Another risk common in most loans is the credit worthiness of the borrower. As a hard money lender, this is a minor issue. You are primarily looking to the property itself to return your capital and a nice profit in the event of a default.

As a hard money lender you also avoid the risk of tying up your capital for long lengths of time. Since your loans are relatively short duration, you have your capital back for other projects, loans or for your personal use. This allows you to quickly respond to changing economic conditions and neighborhoods.

The higher rates charged on these loans provide an excellent buffer for inflation and rate changes in the market. Want further protection? Rates can even be variable or you can participate in the profits!

If you already understand real estate, hard money loans are really low risk and cannot be beat for the returns on your capital and time.

Due Diligence…

One of the most important things a hard money lender does to be successful is doing good “due diligence.”  That means checking out the collateralizing property and the borrower. Where the conventional lender concentrates on the ability of the borrower to pay back the loan, the hard money lender concentrates on the property and its ability to repay the loan.

The knowledge to do good due diligence and access the viability of the project is why every successful hard money lender has a background in real estate or has someone they can depend on who does.

More important than the property is the neighborhood. The types of people the neighborhood attract will determine the kind of people attracted to the property.

• How much competition is there?
• Are there indications of disposable income and/or credit among the neighbors?
• What is condition of other property?

These questions are important to answer before even considering the property itself.

Next the property is evaluated along with the investor’s background and ability to do what he or she says they can do. Trust but verify.

A good hard money lender wants their borrowers to make money.  That way the lender is sure to get paid and their borrower will come back for another deal…again and again!

Foreclosure and Dealing With Default…

Of the many loans over the years, I have had to do very few foreclosures. Upfront due diligence and proper paperwork go a long way to making a successful loan.  Although foreclosure should be considered the last ditch effort to collect on your loan, you still need to be aware of the requirements in the state you are making your loans.

With a properly structured loan, this concern can be minimized. For example, by keeping the loan-to-value ratio low, other lenders that loan at higher LTVs may cash you out in case of a default. Or the borrower can sell the property at a lower price and still pay you in full.  And if it does go into foreclosure, there is more equity to cover costs of foreclosure, holding and fix-up for subsequent sale. There are other ways to lower your risk as well.

You should be aware of the foreclosure process in the state where you will be lending.

Each state is different, but there are basically two procedures.  All states allow the use of the mortgage.  In these states (referred to as lien-theory states), a court action must be initiated and an approval of the court must be gotten before the actual foreclosure sale.  The process can run from a few months to well over a year.  And you don’t get paid while you wait.

The second type involves the use of the trust deed. In these states (referred to as title-theory states) a non-judicial foreclosure can be done. Usually, these are the quickest–some as quick as three to four weeks of advertising and then the sale.

Be aware that the term “mortgage” is used as a slang term for both kinds of instruments, so don’t automatically assume you know which your state allows.  You will need to be aware of the procedure so you can know how to minimize the time and cost.

However, you should be prepared to handle a default even before foreclosure by a willingness to address the default early. Often the borrower can be convinced to get the project done and continue payments if they are not far behind and have not gotten totally discouraged.

This may also be an opportunity to buy the property from them at your loan balance plus a little to encourage them to deed the property over to you.  This is business, so it does not pay to get mad and belittle them. Besides, if you did your due diligence and structured the loan properly, you should make much more profit on a default than if the loan was paid as agreed.

If profiting from being a hard money lender is something you might seriously consider, you should consider attending my soup-to-nuts online class about How to Become a Hard Money Lender.

Good Investing!

Dyches Boddiford

About Dyches Boddiford…

Dyches Boddiford has been investing in real estate since 1980 and is a national speaker. He speaks from experience in single family homes, owning apartments, mobile homes, buying discount mortgages, hard money loans, developing, including using land trusts and land contracts.  You can get information on his upcoming classes and sign up for his free newsletter www.Assets101.com.

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Software Info at: FreedomSoftIsHere.com

OK, guys.  So the tsunami of emails in my inbox (heh…yours too?) makes it all too apparent that a new real estate product launch has hit and hit hard.  But pre-written sales copy and “canned” webinars aside, there’s one glaring question that needs to be answered…

When you take a good, hard look — past all the hypey headlines, the fancy videos and even Preston’s larger-than-life personality and his mullet (Seriously…am I the only one who sees this?) — The glaring question still remains…

Does FreedomSoft Really Stand Up On It’s Own?

Well I’ve had a little exposure to it personally – yes, in advance of most people. I got to tinker around under the hood since I own this here fancy REI Tips website.

But let me say, more than a few have noticed that, amid promotion barrage, I’ve been strangely silent. And yes, I’ve taken a back seat on this intentionally up to now.  And the reason why is explained pretty well in the video above.  But basically I’m starting to rethink the whole “everyone emails about everything all at once” thing.

Now about the software, I’ll be honest…I already figured it would be pretty well done. After all, the guy behind the actual software development (No, not Preston or Pete — another guy who’s waaaaay behind the scenes) — this guy’s like a brother to me, and known for being a thousand percent committed to exceptional quality in every project I’ve ever seen him tackle.

Update: The “Secret Guy” behind the scenes actually stopped by and revealed his identity in the comments below.  Bet you recognize him.  Keep reading…

So I had high expectations already. And I must admit I was quite impressed. But what I didn’t expect was how much they were building into it – in terms of the list of features.  Apparently they took their “all-in-one real estate investing solution” idea a lot more seriously than I gave them credit initially.

A Few Strong, Personal Cautions…

First, before you move too fast, please realize what FreedomSoft really is — it’s software.  Now yes, they’re throwing in a bunch of other stuff — and some of it pretty darn alluring for sure.  But at it’s very core, this is a business tool — a powerful one, yes — but it’s not an actual business. Please be careful not to confuse the two.

And don’t make the classic “bright shiny object syndrome” mistake of letting all the marketing and hype surrounding this convince you it’ll run your whole 7-figure real estate operation while you chillax on a Hawaiian beach next to Andy Proper.

With all that this fancy software can apparently do, it can and will powerfully multiply your REI business efforts when and if you actually apply it…BUT …if your business is still sitting at zero, friend…well, zero multiplied by anything is still zero, isn’t it?

So for starters, you need an actual real estate business for FreedomSoft to do you any good, OK?

Having said that, I’ll say this: As a business power tool for serious real estate investors, I’ve honestly never seen FreedomSoft’s match. There is one software product out there that could be considered comparable in many respects…but they’re also different in a number of ways…and even the mastermind behind THAT software is promoting FreedomSoft right now.  Which says something I think.

A Few Unanswered Questions…

Here are a few questions I don’t know answers to…but that deserve mention…

• For their comps…where do they get the data?
• Buyer/seller/landlord leads on demand…again, where are the leads sourced from?
• Can you import your own contracts, forms and letters into the big, fancy forms editor thingy?  Or are you limited to only what they have in there?

Update: I got “F$ Secret Guy” to stop by personally and answer these questions (and yours) in the comments below this post.  Read on for straight answers you WON’T find on any webinar.

What To Do?

First, if you’re considering this, put on your “hype blinders” and be as objective as possible in your review.  I hope my experience in the video above helps…but in the end, only you can decide if this will be just another impulse buy or a real game changer for you.

My suggestion?  Focus On The Demo Videos…

Scroll down the software description page a little and you’ll see a list of short “behind the curtain” videos, that pretty much lay out every single feature you need to understand to give this thing a fair assessment.

As a very analytical guy, I’m thrilled to see them do this, and above all else I strongly urge anyone considering FreedomSoft to invest a few minutes to review these short videos.  It’s the best due diligence you could do, and should really help gel everything for you.

Update: If the walk through videos are no longer on the software page by the time you visit, then you can also watch them here…

Private Bonus: Get Access to the Full “Kiss Flipping” Intensive Training Series Free (Actual $997.00 Value)

I’m happy to offer my own special, private bonus to anyone who feels FreedomSoft is an ideal investment for your business.

Most of you are probably familiar with our KissFlipping.com training — it’s a surprisingly simple roadmap to making big money flipping houses in today’s market.   Essentially it’s Bob Norton’s entire “Keep It Simple Stupid” model for flipping deals in 2009-2010.  We have a nice, close-knit little community of folks having GREAT success turning deals inside, but it’s totally closed to the public at the moment.

You’ll see on the “sold out” page that normal tuition for this training (when it’s open) is $997.00.  But I’ll gladly open full, unadulterated access as a free bonus to anyone who invests in FreedomSoft through www.FreedomSoftIsHere.com (my tracking link) and then emails me their FS purchase receipt afterward.  (See 2 steps below)

Look, the way I see it, the one glaring hole in FreedomSoft is that it’s NOT really a business model — it’s a business tool. So matching our KISS Flipping training up with it as a complimentary bonus makes total sense.  It finishes the package for you.  Hand in glove.

To Claim Your FREE Kiss Flipping Bonus…

Step 1) Purchase FreedomSoft ONLY through this link: www.FreedomSoftIsHere.com

Step 2) Email us your FreedomSoft receipt here

Step 3) I’ll confirm proper tracking, then send your KISS Flipping Membership/Access info.

That’s it. Easy as pie.  And yes, a solid street value of $997.00…but absolutely worth a lot more.  THIS is the real stuff we got here, folks. 

In Summary…

Understand FreedomSoft is not a “virtual money printing machine” and it’s not going to guarantee your success or fulfill your wildest fantasies.  Only you can do that — and so far it still takes more than mere software to make that happen.

But my honest-to-goodness assessment is that it’s extremely well done, and if you have an REI deal-doing business, could be a serious (maybe even game changing) asset to your

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On Friday January 15, 2010 we posted the FHA’s announcement to suspend their now infamous 90-day anti-flipping rule for 1 year, effective February 1, 2010.

Yes, this is great news for investors trying to flip properties to FHA Buyers!  But after reading carefully through it myself, I see there are also some caveats and important nuances you should absolutely be aware of.

So I created the video above to share with you what I feel are some of the most important and crucial takeaways for real estate investors.  And for those of you who don’t prefer video, I’ve also posted the basic summary below.

IMPORTANT DISCLAIMER: But please be advised that I’m not an attorney nor am I rendering any legal advice.  These are my opinions after having reviewed HUD’s actual 3 page flipping waiver, which I advise you and any savvy investor to do for yourself as well.  You can find a link to it on HUD’s website, and I’ve also linked to it from the blog post on REItips.com

First, exactly why is this such good news for investors?

Because for quite some time now investors’ endeavors to earn an honest profit flipping great houses to qualified FHA buyers have been stymied by the FHA’s “No Flip 90-Day Seasoning Rule”.  This basically has meant that you couldn’t resell to a buyer using an FHA loan until after you’ve been “seasoned” on title for at least 90 days.  In fact, the rule has actually been that you can’t even go to contract until day 91 – which put your closing typically another 30-45 days beyond that at minimum.

So this waiver essentially pushes the pause button on this rule.  For at least the next year, starting Feb 1, 2010, investors won’t have to sit on your laurels waiting for 90 days on title before you can sign a contract to sell that beautifully rehabbed house to an FHA buyer.

In an effort to help stimulate sales, the FHA is essentially recognizing that people can buy properties, substantially rehab them and improve the value of them in less than 90 days.  And also that, “…the 90-day resale restriction often hinders community stabilization and revitalization.”  But only time will tell if they elect to extend this waiver, repeal the rule entirely, or simply go back to the way things were after February 2011.

Crucial Takeaway #1: Seller Must Hold Title

One thing you’ll notice upon reading the waiver yourself is that the “seller” must hold title to the property.  In other words, they may very well expect to see you (the investor/seller) as the owner of record as of the date your contract to sell to the FHA buyer is executed. So you can theoretically close on your purchase Monday, go into contract with your FHA buyer on Tuesday, and hopefully close with them in 30 days.

While this is a vast improvement over 91-140 days, it does NOT appear that you will be able to do back to back, same day closes to an FHA end buyer. (A-B, B-C).  So you can continue counting A-B, B-C simultaneous closings and 1-day transactional funding out in your FHA flips.

Crucial Takeaway #2: You Still Need Short Term Funding

That’s right, realize that to capitalize on this FHA policy change, you should still be prepared to come up with the short term funding you need for acquisition (especially 30-60 day funding) and to hold the property for a period of time.

Said another way, you will still have to buy and fund your deal, then go through the process of selling to the FHA end buyer. But thankfully, it’s a heck of a lot easier to find 30-60 day money than 90-120 day money.

Crucial Takeaway #3: The 20% Rule

Basically the waiver states that if your resale is 20% higher than your acquisition price, you’ll have to pony up some extra proof to an independent appraiser that renovations and repairs justify the higher price. So keep good records during your fixer projects!  You can probably expect to be asked for your receipts, before/after photos and other records as proof of what you have done to enhance the value.

Also, realize that because of the higher scrutiny you’ll likely face in underwriting, you might have a real challenge flipping houses where you just happen to get a smoking deal, and want to sell to an FHA buyer with little or no rehab involved.  This may be a red flag.  But if (for example) buy a property for $200,000, resell it for less than $240,000, you should be fine.

Criucial Takeaway #4: Is There a Flipping Pattern?

Basically the subject property should not display a pattern of previous flipping activity.  While this seems a little subjective, it could mean that if the property has been previously wholesaled in the last 12 months, the FHA may flag it and disapprove.

So you would be wise to check the last year’s title and see if it’ s changed hands much at all – hopefully not at all.

Other Important Points:

• All transactions must be arm’s length.  In other words, no family member, business colleagues and basically no shenanigans.

• Assignments of a contract for sale will likely trigger a red flag.  Keep it clean and straightforward on your FHA flips.

• Entities such as LLCs, corporations, and trust must be properly established and operating in accordance with applicable state and Federal law.  Again, watch the fancy stuff.

The Bottom Line is This:

The FHA “no flip” waiver is great news and will open up many opportunities for investors in 2010.  There’s a lot of money to be made in the FHA buyer arena, and now our nation’s “housing authority” has taken one small step to try to address the illiquidity in the residential real estate market.  No, it’s not a perfect step – but it’s a step nonetheless, and a positive one.

Again, you should read the waiver for yourself, understand what it is and what it isn’t, and how to apply it to your own real estate investing endeavors.

Was this helpful to you?  Please share it with someone!
Questions? Comments?  Please share your thoughts below…

a

Related posts:

• FHA Suspends 90 Day Seasoning “Flip Rule” for One Year! (7)
• “Norton’s Secret Profits Formula, Part Duex (Plus, Win a Flip Cam)” (17)
• Wired for “REI Wired”? Do Your Due Diligence First… (3)
• What Investors Should Really Know About the New Stimulus Tax Credit (6)
• We’re Back!…And De-Hacked!…Here, Have Some Links! (2)

Friday, January 15, 2010

So I just got back from a late night donut run, and found some titillating news for investors awaiting my return…

Apparently today the FHA has suspended the 90-day anti-flipping rule for 1 year, effective February 1, 2010. So for at least the next dozen months, FHA buyers can obtain loans on properties that have been recently purchased by investors.

This is great news for investors trying to flip properties to FHA Buyers! For the next year at least, you wont’ have to sit on your laurels waiting for 90 days on title before you can even GO TO CONTRACT with a buyer.

• Here’s the first article I read about it: “HOUSING: Feds suspend anti-flipping rule”

• And here’s the actual PDF from HUD that makes it official and takes you through the grueling details…if you like that sort of thing.

So with this, maybe the FHA just got a little less sucky.  For now.  And just a little.

Apparently there are a few details to be aware of, such as if the resale is 20% higher than the investor’s purchase, you’ll have to pony up some proof to an independent appraiser that renovations and repairs justify the higher price. But that’s just good standard practice to have handy as a flipper these days anyway.

UPDATE: After reading carefully through the 3 page waiver myself, I put together an Executive Summary of “must knows” every investor should be aware of…

So tell me…how do you expect this will effect your own real estate dealmaking for 2010?

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Related posts:

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It’s simple, sneaky stuff to help keep your vacant houses break-in free while you’re trying to rent or sell ‘em.  It may not work on true professional thieves…but the reality is, most break-ins are from drug addicts, dumb punks and complete idiots…all of which are typically looking for low hanging fruit…

1. Watch the short 3min 20sec clip below…
2. Then read my comment below…
3. Then leave a comment of your own!…

So after watching Shaun’s tip, my question is this: Wouldn’t having a camera obviously visible (real or fake) just tempt a would-be thief to simply take the camera and whatever else it might be connected to?

I mean, I’ve never tested this theory…up to now, I’ve only used the “Smile, You’re on Candid Camera” sign tactic.  But that’s my thought anyway.

What do you think?  And if you have any thief-staving tips of your own, please do share in the comments below…

PS…An alternative to the above would be to hire this little Asian girl to protect your house…clearly she can take care of business.

a

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But here we are, about a month and a half and a few hundred bucks later  (gladly investing in a website security expert who brought us back to life) .  And not only are we back to life again, but I’m backlogged on stuff to post!

So…having said that, here’s a few tasty links to articles and blog posts I’ve found useful, helpful,  or enjoyable in one way or another within the last few days.

CNBC: Big Banks Accused of Short Sale Fraud

“Just as regulators, lawmakers and all forms of financial oversight boards are talking about new regulations to guard against mortgage fraud and another mortgage meltdown, there appears to be yet a new mortgage fraud out there today, allegedly perpetuated by agents of, yes, the big banks…”

The Real Estate Bloggers: HUD Subpeonas 15 FHA Lenders Over Mortgage Defaults

“We aren’t making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue any indicators of fraud,” HUD Inspector General Kenneth Donohue said. “The fact that there are 15 institutions on this list today does not in any way suggest that there aren’t other institutions that we will not look at later.”

Reuters: Fannie Mae to Bend Rules for Some Florida Condos

“Fannie Mae, the largest funder of U.S. home mortgages, on Thursday said it is making it easier for some Florida condo buyers to qualify for loans in a bid to stabilize one of the worst-hit real estate markets.

The housing finance giant said it is reassessing hundreds of Florida condo projects to see if they are “sufficiently stable” enough to qualify for funding, even if they don’t meet current requirements, Fannie Mae said in a statement.”

Inman: Fannie Mae Expedites REO sales

“Fannie Mae has adopted a new policy in which it may accept offers to purchase homes it has repossesed without notifying loan servicers.

Loan servicers may be required to reimburse Fannie Mae for a loss if it turns out the original mortgage on the home did not meet its eligibility or underwriting requirements.”

Build Bankroll: Steve the Landlord

“I’ve been a landlord for almost 5 months now.  I have learned a lot of different things along the way, but so far it has been easier than I thought it would be.  The main part is, since we have a crew of workers, we can easily get stuff fixed for tenants when it is our responsibility to fix…Some of the things I have learned:…” (interesting tips follow)

RevNyou: A Broad Rant About Guru Real Estate Investing Courses

“…At this point one of the new real estate investors in the room raised her hand. She said “I just took a real estate investing course that told us to go out and get as many credit cards as possible. They said that having all that credit was a good thing.”

Hey, got any other articles or blog posts that have turned you on recently?  Share it!  Post ‘em in a comment below…

Take care,

a

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While a lot of folks are interested in taking advantage of this, the extension has also whipped up a good bit of confusion.

And frankly if you’re an active-market investor you should absolutely be on top if this, making sure good and well that you understand not only it’s implications, but how to make suitcases full of cash from it.

Here, Let Me Help Out…

First off, here’s two great articles you can skim to get the basic mechanics and nuts & bolts of this…

• WALL STREET JOURNAL: “The Lowdown on Home-Buyer Tax Credits”
• USA TODAY: “Home buyer tax credits: Frequently asked questions”

Read those and you’ll understand the tax credit extension about as good as any Realtor off the street. Now to go a step further and see this thing through a savvy investor’s eyes you’ll want to seriously consider…

Getting in Front of the “Feeding Frenzy” to Come…

In case you missed it, right before the tax credit extension was announced , we had kind of a little  mini “feeding frenzy” of buyers everywhere who decided to go ahead and buy a house — motivated of course in large part by their fear of missing out on that nice $8,000 check from the IRS.

And who the heck can blame them?!?  For most it’s tantamount to a refund for most or all their down payment shelled out!

Of course, shortly after the renewal was announced, things cooled down again.  Now folks realize they can relax a bit — at least until spring, when it’s set to expire again.  And it doesn’t take a rocket scientist to connect the dots that as the Spring buds start peeking out, buyers will have every reason to start getting all hot and heavy again…which will spell big money for savvy investors who acquire some solid inventory just ahead of it.

Getting an Extra $8,000 For Every House You Sell…

Realize the investor opportunity surrounding this isn’t just about jumping in front of the action.  I’ve also recently come across another tactic fellow investor Tony Severino just enlightened me to: Getting the IRS to send YOU the buyer’s $8,000 for every house you sell right now.

Here’s a short article he wrote that hints a what he’s doing.  But Thursday night I’m going to really pull the curtain back with him.  I hope you can join us…

Creative Investors and the Renewed First Time Home Buyers Tax Credit

By Tony Severino

By now everyone has heard that the 1^st Time Homebuyers Tax Credit has been extended. And while this is a great tool for traditional home buyers and Realtors, it’s an even better tool for the Creative Investor.

There are several reasons for this, and one of them is actually pretty ironic…

First Time Home Buyers (NOT!)

You see, as investors, we can use this program to sell our houses at full retail price in as fast as a few weeks. And the fact is, we can sell these houses to almost anyone.

Why? Because nowhere in the IRS code does it indicate that the buyer must have never owned a home! That’s right, buyers who currently own a home may even qualify for some of the cash that will come from the IRS.

Whether this was intentional or a big fat mistake, it is what it is.  And it really majorly opens up the playing field in terms of who can benefit from it.

Getting Your Own Stimulus…Over and Over Again…

Here’s another reason it’s such a great things for us: As creative investors, it is actually possible to even have the IRS send a check to YOU through your accountant to be used as a down payment on a house that you sell to someone who qualifies for the tax credit.

Let that really sink in for a moment…

You can have the IRS send an $8,000 check to your accountant that he or she can then deposit directly into your account as all or some portion of your buyer’s down payment.  I’ve done it well over a dozen times now and plan to continue right up until the time this thing expires.

An Example…

Let’s say you are selling a house through a creative technique — for this example, let’s use a Land Contract.

On July 2^nd the IRS allowed creative sales like the Land Contract (a.k.a. Contract for Deed) to be included as a form of a sale for the 1^st Time Homebuyers Tax Credit.  So yes, it definitely qualifies.

So we sell the property to our buyer using a land contract — easy enough.  Now using the 1^st Time Homebuyers Tax Credit, we can then have the IRS send our accountant an additional check for up to $8,000 that we will use as an additional down payment.

What I mean by an “additional” check is that the buyer puts his/hercash down (this is not a no money down deal for them) and then we get a second check from the IRS that we all agree is to be used as a supplement to the down payment.

Now I am not an accountant — which is exactly why an key part of our team is an accountant who really “gets it”.  He creates and fills out all the paper work the IRS needs to be able to have my buyer’s nice 8,000 check get sent to him!

Now when he gets the check, he simply calls me up and says “Hey Tony, we got another check for you!”  and we proceed to deposit it into my account.

Any accountant could actually do this for you, but the fact is most don’t “get it” on their own.  They not only mistakenly assume that it is only for the buyer, but that it can only be done in 2010 when they file their 2009 tax return.  Not true!  Anyone ever heard of an amended 2008 return? 

Clearly this is not the kind of accountant we want on our team. This is a killer tactic, but you must have an accountant who “gets it” on your side.

My 4 Paydays…

Now when you sell under a land contract, the deed does not transfer to the buyer, but rather it says in your name. So, you have four paydays here:

1. Buyers initial down payment contribution
2. IRS stimulus contribution
3. Monthly cash flow (income vs out going payment to my bank)
4. Final cash out

And no, it is not a requirement that you own the property free and clear. As I said, I have sold over a dozen properties using a land contract that I bought “subject to” at this point. I just ensure that the underlying mortgage is paid, like normal.

What’s So Great About This?

Using Obama’s Tax credit, is perfect for us as creative investors, we get the best of both worlds!  Consider that we are selling the property…

1. At full retail price…
   
2. To good, qualified people…
   
3. With down payment cash from the buyer…
   
4. With up to $8,000 cash from the IRS…
   
5. With monthly cashflow…
   
6. And even a nice payday at the end!

And keep in mind, with the Land Contract example, I’m not a landlord.  No “tenants and toilets” for me!

The bottom line is this: Selling a house at full retail price and getting a nice bonus from the IRS is really pretty easy right now.

This is a unique opportunity for us in a unique time right now. You just need to employ a creative selling technique, a seasoned team who “gets it”, a few of the right clauses in place — and of course your buyer doesn’t even need to be a 1^st Time Home Buyer!

Tony Severino
Chicago Real Estate Guy

About Tony…

Tony Severino is a 14 year real estate investor who, with his wife Lisa Severino, started their business from nothing and created one of the largest Real Estate Business in the Chicago area.  He’s had his hand in a number of different kinds of deals, but prefers making money through creative real estate transactions the most.

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