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REE.com - where the real estate investor market is always hot. With real estate credit virtually non-existent, facilitating a direct 1031 exchange between property owners is a great alternative. REE.com is the oldest, most trusted, and fastest-growing online exchange website for the trading or property swap of commercial real estate properties.


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 EXCHANGE AND BUY BACK
(Very similar to the R.E.O. except done with individuals)
When -   When a person wants to establish a value on the property that they are exchanging in to another individual or when they want the option to repurchase that property.
Situation -   Jones has a four-plex that he feels is well worth the money. The rents, however, are not at their peak and therefore most people look at the property with the idea that it is not worth what he is asking.
How -   Jones exchanges the four-plex at a value of $120,000. He then agrees to buy back the property at that figure within 1 year’s time. That time may be extended to as long as 5 years where he would have the option to repurchase the property at a price of $130.1000.
Results -   If Jones buys the property back he then has established that the property value would be correct. Also he is establishing a new basis when he does buy the property back. If he just has an option to buy the property back within 5 years, Jones might find that the property values increase considerably and he could buy the property at a “bargain” price.

 EXCHANGING ENCUMBERED PROPERTY FREE AND CLEAR
When -   When you have a property with a large loan on it for which you can not get a taker.
Situation -   Jones owns a multiple zoned lot valued at $180,000. He owes $100,000 against the property. He has been unable to find a taker for the property under any situation. He offers to exchange the lot for a free and clear single family home of approximately the same value. He then gets a new loan on the house for $100,000 which he uses to pay off the loan on the lot thus exchanging the lot free and clear.
Results -   You make an exchange or transaction that would be almost impossible otherwise.

 LAND, TO IMPROVED, TO PAPER AND LAND
When -   A “dealer in real estate” can often do well working this formula over a period of years.
Situation -   Jones, a real estate agent, owns a $10,000 lot F/C in another state. It’s not really doing him any good.
How -   Jones exchanges this lot for a $50,000 run down house offering to get a new $40,000 loan giving the proceeds to the seller. Proposal is accepted as seller wants the cash and will take the lot to get it. Jones gets the house, repaints and does a little “clean up” work with new landscaping. He then offers the house out for $60,000 and will take a little lot as a down payment. He is offered and accepts a little 5 acre parcel valued at $10,000 and carries back a $10,000 2nd at 10% interest, $100.00 payments, due in 10 years.
Results -   Through some clean up, fix up and his ability in marketing, Jones can keep this up indefinitely. He can acquire a considerable amount of “paper” doing this over several years. It works best in periods of high inflation but will also work during recessions as you can usually make better “buys”.

 R.E.O. (REAL ESTATE OWNED BY A LENDING INSTITUTION)
When -   You have large equity or free and clear property you can’t borrow against but need cash!
Situation -   Jones owns a$100,000 F/C 5 acres at edge of town. He would like to keep it but needs immediate cash in the meantime.
How -   Jones approaches a local savings & loan and offers to exchange the land for two $50,000 F/C condos the lender took back through foreclosure. He then offers to buy back the land provided they (or someone else) will lend him 80% on the condos. He agrees to buy back the land for 30% down and “sweetheart” terms.” $30,000 cash down, 8% interest only, payment quarterly for 33 years, then 10% interest only, all due in 5 years.
Results -   Jones generates $50,000 cash, has $20,000 equity in the depreciable asset and $30,000 equity in his own land with a new higher basis.

 ACQUIRING PROPERTY WITH CREATED MORTGAGE OR TRUST DEED
When -   When you need more shelter or have the opportunity to acquire more real estate and you don’t want to get rid of the property you have.
Situation -   Jones owns a$300,000 8 unit complex owing $120,000 on it. He wants more shelter but doesn’t want to pay the expenses and interest of getting a new loan.
How -   Jones offers out a $100,000 created 2nd mortgage or trust deed payable at $1,000 a month - 10% interest due in 10 years. He exchanges this for a $400,000 12 unit complex and takes over a $300,000 loan.
Results -   Jones has no loan costs and is using his equity to acquire more shelter. He has full basis on the acquired property. Other party can report the note as down payment at the fair market value of the note. (Check with your accountant.)
*The above transaction has the same “overall benefits” as a tax deferred exchange!

 SPLIT, CREATE, AND ACQUIRE
When -   When you wish to acquire a piece of property that can be split into smaller parcels and don’t have the cash to make the transaction. You know that the property will be worth a great deal more smaller sections.
Situation -   Jones finds a 5 acre parcel owned by Smith which can be divided into 4-1¼ acre parcels. Smith wants $20,000 cash for the property. Jones doesn’t have the $20,000 cash but know that each parcel will sell for approximately $15,000 as 1¼ acre parcels under good terms.
How -   Jones offers Smith the $20,000 on the 5 acre parcel providing Smith gives him the opportunity to divide the parcel into four smaller parcels. Jones arranges to sell or deed the parcels to a partnership he controls carrying back four $14,000 notes written at favorable terms. The partnership gets the property at no down payment, however, will have to make payments on the notes which will be against the property when they close. Jones then finds a buyer who will pay 60% to 70% of face for the individual notes. (At 70% this would indicate $9,800 on each note.) Total cash generated would amount to $39,200 from which will be paid the $20,000 purchase price and costs of the transaction. Profit should be substantial. The partnership now either puts the property on the market for sale at a existing loan or perhaps holds the property for development.
Results -   Seller received the exact terms he wanted on the property, Jones made a substantial profit, the partnership stands to make a profit, however, does have some risk. (Jones needs to be very sure of what those properties are selling for and under what terms and conditions the property will sell.)

 ACQUIRING PROPERTY IN FORECLOSURE
When -   When good properties are available through real estate foreclosure.
Situation -   Jones either has a good quantity of cash sitting in the bank earning very little interest or a good line of credit on which he may draw. Is interested in making good money in real estate and acquiring properties at bargain prices.
How -   Jones studies the foreclosures through the local newspapers and the “transcript” (a publication which gives all the recordings in a certain county, to see what properties are coming up in foreclosure). When he sees a likely property, he will order a “property profile” (a list of all recordings against a certain property over the past few years) in order to determine whether or not this is a first trust deed or mortgage or a junior lean. Once he determines that, he inspects the property if he feels this might be a “bargain situation”. As a rule, he will be unable to get into the property and may find the tenants to be uncooperative. Through careful study and checking to the best ability he may determine that this could be a bargain which could be purchased for anywhere from 1/3 to 1/2 of its market value if fixed up. He then makes arrangements to have the cash available at the sale.
Results -   Jones is able to pick up a property at less than 50% of value. It is a risk, however, due to the fact he may have to put in several thousand of fix up and have to employ an attorney to get the previous owner out of the property. He also needs to have a large amount of cash available, however, the return can be considerable.

 PUTTING UP FINANCIAL STATEMENT FOR 1/2 INTEREST
When -   There are times when you may come across a tremendous buy in real estate but are unable to swing it with your own borrowing ability.
Situation -   Jones has found 9 units which he feels can be purchased for approximately 60% of their value. To acquire these properties, however, would require getting a new loan and Jones does not have the ability at this time to borrow the $200,000 necessary.
How -   Jones phones an investor friend of his who has a considerable financial statement. Jones explains the situation detailing how he feels that there should be almost a $100,000 profit in this property, however, will be unable to handle it himself. He asks the client if he is interested. The client indicates he is and would put up his financial statement and borrowing ability and Jones will put up his work and expertise. A loan is obtained by using the client’s financial statement and the property is required. This could be either on a partnership situation or an undivided interest.
Results -   Jones would stand to make approximately $50,000 in the transaction where without the client’s financial statement he would have been unable to take advantage of the situation. The client stands to improve his position by the same amount for only putting up his financial statement in order to secure the loan.

 ACQUIRING R.E.O.’S - NO DOWN PAYMENT
When -   When certain financial institutions have real estate which they have acquired through foreclosure which they wish to divest themselves of.
Situation -   Jones becomes aware of a local savings and loan who has several parcels of real estate which they have acquired through foreclosures. The savings and loan is not interested in keeping the real estate but would like to divest themselves of it as soon as possible.
How -   Savings and loan are reluctant to sign over real estate to another party without having some sort of a down payment or the acquiring party be at risk in some manner. Accordingly, the best way to wok this is to give paper back to the savings and loan secured by both their R.E.O.’s and other property which Jones may have. Jones will furnish appraisals to show that he does have good equity in his other property so if the payments are not made, the savings and loan can come back and reobtain their own property and other equity which Jones has.
Results -   Jones is able to increase his real estate holdings considerably by using equity without having to go to the trouble of getting new loans on the property incurring borrowing expense.

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