The following is paraphrase of a recent article posted on one of the Creative Real Estate Financing
Working foreclosures can indeed be for the "newbie" or grizzled old salt, and needn't
require a penny out of pocket, good credit or a lot of experience if done properly. It’s an excellent
way for a "beginner (whatever that is…there are no grade levels in owning real estate)" to get involved
in creative real estate acquisition and management.
For example, I picked up a property yesterday (one of a couple this month) for $500,000 that is
worth $568,000…with $426,000 owed on it at $3,600 per month. It cost me nothing...I have no payments
to make, no credit risk to take, and I didn't have to qualify for, or take over, any loans, fill out
any forms or offer a credit report.
I merely explained to the seller in foreclosure that I would arrange for his arrearage to be covered
and his payments to be made on time, and that his equity would be re-paid to him at the end of seven
years: minus my cost of bringing his loan current…assuming appreciation allows for such refund.
The loan payoff will come out first, then costs of sale, then my contribution (the arrearages
and any closing costs), then his contribution (his present equity): then everything else will accrue
The arrearages are $26,000.00
My acquisition cost is $500,000 less the $26,000
My Resident investor will come in at $560,000 with about $40-50,000 (8-10%) and take over all
payments, management, maintenance, repairs and upkeep in exchange for tax benefits and HALF of
any future appreciation there might be.
In the deal, I should clear about $20,000 up front (more, if I can get the lender to give me a
forbearance on all or part of the arrearages), $300 (or so) per-month positive cash-flow for
seven years: and at the end, given any appreciation at all, I will receive my bumped equity
($60,000) plus half of the loan’s principal reduction (est. $12,000) and half of any actual
appreciation there will (may) have been over the term of the agreement.
Given $100,000 in appreciation I will have earned some $175,000. If there were to be no appreciation,
I’d still have made $125,000.
In effect, if I am to receive that money over 7 years, didn’t Just give myself a $2,100 per moth raise
for the next 84 month, on just one transaction? Now, think about it…what is it here that anyone (newbie
or not) in our business couldn’t have done, had they known how to find the property and how to make the
deal? How much would the property have cost them? How much would their monthly payments have been? What
would their personal credit risk have been? How much would they have paid in property tax, insurance,
management, maintenance, repair and upkeep? How much time would it have taken (‘has taken me about an
hour so far)? How many times would they have had to stand up from their easy chair after having inspected
property, in order to make it all happen? Actually my wife does my inspections, so I never have to stand
up at all?
YES! County records filing ARE ideal for someone who wants to make big money early on: foreclosures,
tax liens, tax sales, tax defaults, divorces, estate sales, bankruptcies, zoning and building code
Quick Start Success Pack by Bill Gatten
Bill Gatten, www.landtrust.net
is an accomplished Real Estate Investor, Author, Lecturer and
Sales Trainer. With over 40 years experience in banking, equipment
financing and leasing, and real estate investing, Bill is considered among
the top Creative Real Estate trainers in the U.S. today. His book, No Down!
No New Loan! is now in its second printing. A new book for investors is
due out in 2002: 'Making it BIG in Creative Real Estate...for the Cash,
Credit, Income and Experience Challenged.'
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