Profit Strategy #2 – GET THE DEED
This profit strategy assumes that you have chosen not to work in keeping the payor in the property, but rather, have decided that the best thing is to have them leave. Then again, maybe the payors have come to that decision on their own (they can no longer afford the property, etc.). Whatever the case, there is a way of getting the payor out of the property that is preferable to foreclosure.
Remember our earlier discussion covering the things that could happen on the way to foreclosure, including the payor filing bankruptcy to postpone it, destroying the property on the way out, etc? One surefire way to avoid all of that is to give them an incentive to leave and, at the same time, give them an incentive to deed the property over to you.
Having the payors deed you the property rather than going through the hassles of foreclosure benefits both you and the payor: the payor avoids having a foreclosure on his/her record, and you get a property back in decent (though probably not pristine) condition.
Now consider this: Not only do you own the note on the property, you now own the property itself. “He who controls the debt controls the equity.”
This gives you two choices:
You could REFINANCE:
You could refinance the property for what you paid for the note. Going back to our original example, you could refinance your $150,000 property for $90,000, giving you $84K to pay for the note, and another $6K in closing costs. You’ve now paid $90,000 for a $150,000 property, giving you $60,000 in equity.
Better yet, why not refinance for 80% of the $150,000 value at $120,000? This gives you $84,000 to pay for the note, $6K in closing costs, and another $30K to put in your pocket! Wait – this gets better! The $30,000 that you put in your pocket is tax-free, because it is borrowed money! And, you’ve left $30,000 of equity in your property!
Of course, you’ll need to cover the payment on that $90,000 refinance, but couldn’t you lease the property out and have someone else make the payment for you? Even better, if your monthly income exceeded the loan payment, you’d have given yourself yet another profit center!
You could SELL:
This is a no-brainer. And yes, you can combine the two, refinancing for 80%, pulling cash out up front, then getting a sizeable down payment and selling on a wrap, or ???? You decide – there are myriads of things you can do with just these two techniques, and just think: in future blogs, I’ll show you four more ways!!
In the meantime…Happy Investing!
