AFS Deal - How can you turn around and sell without the deed?

[Doris]

Hi,

I have a question based on one of Ron`s examples: Let`s say I buy Bob`s house by taking over his debt. It`s a $210K house (ARV) and he owes $175K. I take over his debt on an AFS and make his mortgage payments of $1,100 per month. With an AFS my understanding is that the deed stays in Bob`s name until I pay him in full (or in this case pay out the remaining mortgage). I simply have a caveat on title showing that I have an interest in the property.

Now I want to turn around and place a Tenant Buyer in the property, collect a down payment and make a decent cash flow spread on the rent. My question is how can I do this or in fact use any other exit strategy when I don`t have title to the house? I have an agreement that says I`m buying the house but my understanding it that I don`t actually own the house until it`s paid off and title transfers to me. How can I offer up the place to anyone else until I get the title?

This has been an ongoing mystery every since Ron`s course and course materials in which he says to "Get the deed Subject to". In Canada we have Agreements for Sale with no transfer of deed. So how does this work. I am grateful to anyone who can demystify this for me.

Thanks in advance,

Doris of Ottawa

 

[Thomas Beyer]

QUOTE (Doris @ Nov 4 2009, 02:51 PM) ..How can I offer up the place to anyone else until I get the title?

..
With an AfS you own the property beneficially .. you will treat it as your own .. fix it, pay taxes, rent it .. and your contract with seller will allow that !!

Once you get a new mortgage .. or sell it you will then pay out seller !!

However, this is an ADVANCED strategy .. and not intended for beginners .. do a few "normal" deals first !!

 

[gwasser]

I agree with Thomas,

If I would go down this trail, I would start by doing run of the mill rental property or better a couple of them to learn the basics.

Next, `rent-to-own` deals on properties already under my control or buy a property conventionally for the purpose of operating it as a `rent-to-own` Gain some practical experience and especially understanding. There is a lot of difference between `reading it in a book` and actual doing it.

I am sure that by the time you have that under your belt, you will also come accross properties that may lend themselves for an AFS.

Just a suggestion

 

[Dan_Eisenhauer]

To answer your question specifically, rather than give you warnings, which do need to be given:

When you have a contract to buy anything, you can sell or assign that contract. The perefect example is buying a pre-sale condo. You used to be able to sell, or assign, that contract to a third party before the building was even completed. (After seeing huge profits made by some sellers, many developers prohibit assigning today) You do not own the premises, but you have a legal interest in it. It is this legal interest you are selling, not the property.

If you are planning to use this strategy, you need a good real estate lawyer to prepare agreements for you. I have not seen what LeGrand has given out, but be cautious about using anything he has provided.

 

[Doris]

QUOTE (ThomasBeyer @ Nov 4 2009, 05:50 PM) With an AfS you own the property beneficially .. you will treat it as your own .. fix it, pay taxes, rent it .. and your contract with seller will allow that !!

Once you get a new mortgage .. or sell it you will then pay out seller !!

However, this is an ADVANCED strategy .. and not intended for beginners .. do a few "normal" deals first !!

Thank you Thomas and others who replied to my question. I do appreciate your feedback. I have been investing for nearly five years and own several doors in a couple of provinces so I have some road miles under my belt, including working with JV partners. However, all of my deals have been conventional so this is new ground and I am doing my homework before launching in. My business partner and I do have an excellent lawyer and we are working closely with him to develop Ontario-specific forms. At this point I`m trying to wrap my head around the details of the various scenarios Ron presented.

It is certainly worthwhile recommending caution when launching into quick-turn deals. That`s why this forum is invaluable to me - it`s a great way to work out more of the details. Thanks again for your feedback.

Best regards,

Doris of Ottawa

 

[marcp]

Actually the AFS was provided by Barry.

 

[Thomas Beyer]

QUOTE (Doris @ Nov 6 2009, 04:51 PM) Thank you Thomas and others who replied to my question. I do appreciate your feedback. I have been investing for nearly five years and own several doors in a couple of provinces so I have some road miles under my belt, including working with JV partners. However, all of my deals have been conventional so this is new ground and I am doing my homework before launching in. My business partner and I do have an excellent lawyer and we are working closely with him to develop Ontario-specific forms. At this point I`m trying to wrap my head around the details of the various scenarios Ron presented. It is certainly worthwhile recommending caution when launching into quick-turn deals. That`s why this forum is invaluable to me - it`s a great way to work out more of the details. Thanks again for your feedback.

Best regards,

Doris of Ottawa
sounds great .. an AfS may be an excellent way to become a successful middleman (or woman in your case), as you benefit the seller .. and the ultimate buyer .. be it within 10 minutes of closing or 4 years later ..

Be mindful that the devil is indeed in the details .. and be mindful of your obligations to the seller if the ultimate buyer defaults on his promises as you will be stuck with obligations. Hence, be VERY mindful of the details !