Scale Your Real Estate Investment Business (CFFL 516)
Transcript:
Jack Butala: Jack Butala with Jill DeWit.
Jill Dewitt: Hello!
Jack Butala: Welcome to our show today! In this episode, Jill and I talk about scaling your real estate investment business. Sounds like an episode of Shark Tank. Before we get into it, let's take a question posted by one of our members on landinvestors.com online community. It's free!
Jill Dewitt: Okay! Chuck asks, I am selling a large parcel on terms of which I signed a purchase option agreement with my seller. The parcel is 40 acres that I auctioned for $9,000 and I'm closing through a title company. Before I sign a terms agreement with my buyer, I thought I would seek advice from our forum to see if I should first fully close on the property with my seller to make sure there are no hitches due to something I may have missed in my due diligence. I don't want to get stuck not being able to close due to some surprise with the property, via title company findings and I've already signed a purchase and sale agreement with my buyer.
Jack Butala: All good points.
Jill Dewitt: So, should I simply fully disclose to my buyer that I'm in the closing process and there may be a chance I cannot sell and will refund all of their money and have written in the-
Jack Butala: Purchase and sale.
Jill Dewitt: Purchase and sale with my buyer. Any other advice? Thanks in advance!
Jack Butala: Excellent, excellent questions Chuck. And this group is so intelligent. Not only did you ask the question but you gave three or four options on how I should answer it.
Jill Dewitt: Right.
Jack Butala: I'm serious. It's just very well thought out and intelligent question.
There's two ways to sell property on terms. A deed of trust, which is kind of what you do, depending on the state you're in, this is how you do it. But, a deed of trust is what you do when you buy a house with a mortgage. There's a trustee and it gets recorded.
When you buy a house, you don't own it. The bank really owns it with the mortgage. And it gets recorded with a title agent. And then you actually get the deed recorded in your name with a lien on it all throughout the payment periods. For 30 years sometimes. When you're done, the bank says "Okay, thanks. I'm releasing this lien and you own it, what's called, free and clear."
Another way to do it is called a land contract, or just a contract for sale. Depending on which part of the country you're in. Land contract is Rust Belt, contract for sale is out here West. That way, the property is in your name throughout the duration of the payment period as the seller. And when they're done paying you physically deed the property over to the ... And that's how Jill and I that's how I do all of our deals. And I'll tell you, the reason we do them that way is because I got burned doing it the other way, because if and when they default, they cost a tremendous amount of money to undo that deed of trust.
Jill Dewitt: Right. Exactly.
Jack Butala: So, to answer your question directly Chuck, if that's not boring enough today. To answer your question directly, close the deal, if you love the property. You obviously got this far, so you love it. Buy the property for 9,000 bucks, now you're done, you own it, it's in your name. And then do a contract for sale. And let the person make payments and ... What Jill does all on the way payment cycle, is she communicates with the buyer. And says, "Hey, if you're enjoying it that much, and you love the property that much I'll give you a cash discount." This is like 6, 8, 10 months in.