Hi, Clint Coons here with Anderson Business Advisors.
And in this video we're gonna talk about
the number one entity, I think every real estate investor
needs to be aware of for investing
during this unprecedented time.
All right, you wanna find out what it is?
Let's get started.
(upbeat music)
Okay, when we talk about the number one entity
I've already discussed this entity before
but many of you that are watching this video right now
You've may never have heard of the strategy
I'm about to share with you.
In fact there's two strategies here,
they're kind of wrapped into the same concept
and that is buying or acquiring property
with very little money down, no credit that is needed.
You're able to go out there with a little bit
of money and tie up a whole lot of property for yourself.
Now, these types of nesting opportunities only
come around in certain periods.
That is they tendive to be better when the market's
in certain state of flux than in other times,
when markets are doing great like we've been doing
over the past several years.
You're not gonna see as many distressed homeowners
as you may in the future.
So these are really strategies designed when working
with somebody who's in a distress situation
to help them out of that situation.
And at the same time receive some benefit yourself
for the good work that you would be doing
by helping someone out of you know situation
where they're looking at possibly losing their property
because they can no longer make the mortgage.
What am I referring to here?
I'm referring to subject to real estate investing
or sandwich lease option.
Now these two strategies and what it means is this
with subject to investing, you're gonna go out
you're gonna find a piece of property.
So here's a house right here, and this person is probably
in a situation where they're behind in the mortgage
behind on taxes, maybe it was an investment property
and there was one of the first properties they bought.
They thought they wanted to be a real estate investor
now they're just ready to call it quits
because what is happened here.
And so they wanna get out of it,
now, if the property let's say is actually gone
down in value or it's right at the value
of the mortgage, the investor themselves you know
they don't see any benefit in selling it
because they have to (indistinct) factor in all the costs
and commissions they're gonna lose money.
Some of these people become paralyzed
and they just sit there and they let the problem foster
fester, excuse me.
The other issue you have right now is
you're not know getting appraisals on properties, you know
it's very difficult to sell something
because the appraisals are coming in
or no one's going out to appraise on the property.
So this is what makes it really unique and an opportunity
for the savvy real estate investor is to find someone
in this situations, let's say we see this individual here
and they have a $275,000
in debt in mortgage
on that property, so you would approach them.
And you would say, "I like to buy this property for me."
So the subject you would work is false
you approach him and say, "Listen I'm gonna buy
the property, but here's the terms,
I am going to pay you a set sum of money.
Maybe I pay you $5,000 for your property
and I will pay your mortgage."
"I'm not going to assume your mortgage, all right?
I'm just gonna take the property subject
to the existing mortgage.
So you no longer have to worry about paying it.
I'm gonna take over the payments for you
but it's still gonna be under your name."
That's what we mean by subject to, you're buying
the property subject to an existing mortgage.
You're not going on the title.
So you pick up this house for $5,000
that is your only out-of-pocket.
Your only risk is the 5k on this deal.
You pay him the 5k, you take over the house.
Now, how do we move the house from the seller to you?
Now that's where this number one entity comes into play.
See the difficulty here for many people is moving the house
to the buyer without alerting the bank
the fact there's been a property transfer
and getting them to call the note due
'cause the bank's already in the state of flux, right?
Because this person may be two or three payments
behind on their mortgage, even after the deferral payment
if they were able to get that.
And so the bank's gonna be maybe be scrutinizing in this.
So you don't wanna alert the bank
that this property has been sold.
Because if they see that they will accelerate the note.
So the way you avoid it in which real estate investors
have done for years is you set up that land trust.
There is a number one tool, land trust
and now you have this investor right here
transfer the property into a land trust.
So now they move...
Property moves into this trust
once it's in the trust, then I'm over here
as the buyer,
I will then have the seller
assign me that means transfer me the beneficial interest
of this trust and the trusteeship for $5,000.
So I'll pay them the five grand.
When they signed over the trust to me.
Now property's held in the trust name,
I own the trust.
I control the trust and it doesn't alert the lenders.
The lenders thinks well maybe this person's, you know
you reinstated their mortgage for them
you pick got them all caught up,
got the property taxes caught up.
Everything's fine, lender's like
"Good, I'm in the situation again,
I don't wanna own property I wanna loan money."
So this guy has come current but they don't know
the property has been transferred.
So the land trust is a phenomenal tool coming up
and this type of investing period,
where if you find people out there
that are in this situation there will be,
I mean, there will be investors, I've seen it happen before.
I've already started doing some of this investing
that are gonna want to get out of these properties,
and so you're gonna walk into these deals with your terms,
but you wanna take it over and not use your credit.
I just did one, two months ago like this
on an apartment building they can be done.
So you get them brought over and use the land trust
and it's an effective way to do it.
Now, the other option you have is what's called
a sandwich lease option.
And so in that situation what happens is that
you go to the seller and you say
"I wanna lease your property from you."
So they have this property right here
and you tell them you wanna lease their property.
And so what you're gonna do in that situation
is you're going to then lease it back out to another party.
So you're gonna make money,
and with that money, you're gonna pay back the seller
on the lease.
But you wanna make sure that that sandwich lease
also has an option tied to it so you can buy
the property within two years.
So let's assume that there's this property here.
I know the guy's in a distress situation
I walk up and I say, "Here's what I'm gonna do.
I'm going to reinstate your mortgage so you owe $6,000
to get that mortgage reinstated
that's gonna be your option fee.
Okay, I'm gonna pay you 6,000 bucks.
And that gives me the ability to exercise
to buy this property, anytime between now
and two years for let's say was it at 275,
that's a mortgage, let's say $300,000."
"Okay,
now my payments every month
I'm gonna take over the property and I'm going to pay
your mortgage for you.
So you're no longer going to have to worry
for your mortgage.
I'm saving your credit, you're out of the deal.
I'm gonna pay your mortgage on a monthly basis"
and how are you gonna pay the mortgage?
Because when you enter into this lease
where they lease you the property, and this gets...
remember you should record this as well
so they can't sell out from underneath you.
When the property gets leased to you
you're gonna turn around and lease it
to some tenants who are gonna move into the property.
And so the money you make, let's say
that the mortgage here is a $1,200 a month
you're bringing in $15,000 a month,
and then you're turning around and paying the $1,200,
you're making $300 off of this.
And when you do this type of strategy right here
in the sandwich lease option arrangement,
again, I would use...
consider using a land trust.
If you don't think that when you exercise the option
you know, say two years from now
that property is now valued at 425
the market's come back really strong.
It's valued at 425, you go in, you buy it for 300.
You just made $125,000, cool.
Maybe you're gonna sell it at that point in time
gonna re-finance out this mortgage.
But if you don't want to re have to re-finance
out the mortgage, then you wanna make sure
that when this transfer, when you exercise the option
so the bank doesn't get alerted to it,
maybe you go back to that land trust scenario again.
You put it inside of a land trust right there
and once the land trust is what's leasing the property
from this individual, then you're turning around
and subleasing it back out.
So you create your land trust and rather than having
the tenant just transfer it in,
in this situation the tenant is gonna lease it
over to the land trust.
And then eventually what happens when you take
over the title, title would then get transferred
into the land trust name.
When you exercise the option under that scenario
and then you would close and then you have the property
still subject to that existing mortgage.
So a land trust can be the very effective tool
during the times that are coming up
as homeowners finds themselves in distress situations.
The idea is how can I walk into there
help them out of that distress situation, save their credit.
But at the same time, take over that property
without alerting the lender to the fact that
there's been a change in ownership that would trigger
the acceleration clause in that mortgage.
That's why you need to become familiar with land trust.
If you're not familiar with them click on the link
in the (indistinct).
You can go to obtain a strategy session with someone
in our firm or check out my other videos as well
on land trust.
I got a lot of videos on this topic and you'll see just
how valuable tool this can be
with your real estate investing.
All right, take care everyone, and be safe.
(lively upbeat music)