Is It Legal To
buy a home with a loan and lets say your payments are $300 a month for thirty years and then turn around and sell it to someone else for $400 a month for thirty years. When you get there check in the mail you turn around and send $300 to the bank for 30 years?
Also is it legal to buy an old mobile home dirt cheap and then finance it to someone else for for 0 down for 30 years and make an enormous amount of money?
I found a great article on this subject http://www.legalwhiz.com/dueonsale.htm
technical you are suppose to pay off your loan at the sale but according to this it is hardly ever enforced. So would it be a bad idea to buy a property with a loan and then advertise owner financing? Because the loan company might see your ad?
heyshid:
Why would this be illegal? What's the difference between me selling my house to someone with owner financing (meaning they pay ME the monthly mortgage) and what you're talking about?
Now, if you bought the home, with an owner occupied loan, then you could run up against DOS and some possibility of a fraud case (especially if you took the loan out specifically as an owner occupied even though you never intended to live in it), but the DOS would be the least of your worries here. If you never record any transfer between you and the buyer, it would be hard for the lender to find out, unless you got an FHA loan, where they may use inspectors to ensure you're complying with the loan requirements.
You'd have to handle the sale part right, to protect yourself: if sold on a lease/option, you'd keep the deed. If sold on a contract for deed, you'd keep the deed until your buyer satisfied your contract terms (perhaps 2 years payments with a balloon after 2 years). You could then take the proceeds of their balloon, payoff your original loan and keep any difference.
Again, I'm not advocating loan fraud (like lying on your application), but the seller carry-back is a standard way of buying/selling houses, even if the seller uses your (higher) monthly payment to pay his mortgage.
Not legal advice, maybe not even worth .02,
Andy
is the interest rate on the loan higher if they know you are going to rent out the property?
IIlegal? Funny!
Hey guys, the Preforeclosure & other forums here are just loaded with comments & articles from the thousands of people who make their livings this way.
A truly common way to make RE work for you.
I'll bet John Locke has done 100 or more of these, and nothing illegal about it.
On mobile homes, this is exactly the way Lonnie Scruggs, the author of "Deals on Wheels" has done hundreds of MH deals...if you haven't got his book, get it.
Is it legal to? Sure it's legal. This is America...and anything is legal..as long as you know what your doing.!!! The first part of your post is like doing a "wrap around" you are in essence wrapping the second around the first.
The second part of your post sounds good and dandy..but there is a HUGE TAX issue. If you hold a note and are acting as the bank.. the amount that you are financeing is considered capital gains.
Ex. $110,000.00 sales price.
$10,000.00 down payment.
The IRS will tax you on the 100K in full now... even though you will not recieve it for many years!! I could be wromg on the lst statement..but i don't think so...check with a tax adviser first.
Kerry
The tax issue is one of the big reasons many very experienced REIs prefer to lease for 2-3 years, and sell the tenant an option to purchase at the end of that period.
Option money received is not taxable until the option is exercised, or the option is allowed to lapse un-exercised, at the end of the lease period.
Quote:Also is it legal to buy an old mobile home dirt cheap and then finance it to someone else for for 0 down for 30 years and make an enormous amount of money?
Is it legal to finance a car over 30 years? Of course not, but nobody does it. Why ... because it is a depreciating asset that does not have a 30 year life. Why would someone in the 15th year of their loan continue to pay when the house is falling apart and they own much more than it is worth. I have not done wabblies, but I believe the concept is to buy dirt cheap and immediately sell or finance for a very short period of time.
Brenda