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(your email address) - 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. 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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When -   Again this can be used when there is a disagreement as to the price and perhaps the income on the property is not sufficient to warrant the asking “price.”
Situation -   Jones has a four-plex that he has not kept the income up to what it should be. His rents are only $200 per month when they should be at $250 per month to warrant a price of $120,000.
How -   Jones again offers to exchange the property and lease it back at a rental of $250 per month for a period of 1, 2, or 3 years. This will establish in the mind of the taker that the price is worth what he is asking. Jones can then go ahead and increase the rents and if he can do better than the $250 per month, he can actually pocket some money.
Results -   Jones has established a value of the property and the taker of the property doesn’t have to worry about vacancy for the length of the lease.

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.

When -   You can’t afford the negative cash flow on a good property.
Situation -   Jones owned a residential lot that he thought would go commercial in about 3 years. He owed $20,000 on the property with $200 a month payments. Smith could easily afford the $200 a month due in 10 years and wanted a good return on his investment. Jones offered Smith 50% of his equity (in this case $10,000) if he would make the payments. Smith accepted. In 3 years the property went commercial and the value jumped to $80,000.
Results -   Jones ended up with $30,000 and didn’t have to make a payment. Smith put out $7,200, most of which he could deduct on interest and end up with $30,000.

When -   When a person has a high interest, low equity, negative cash flow property.
Situation -   Jones had been forced to take another property in an exchange situation. He didn’t really want the property as it consisted of a small house worth approximately $40,000. The loans against the house totaled $36,000. With the interest rate at 14.5%. The property payments were $447.00 per month and the property was rented at $325.00 per month. Accordingly, this “$4,000.00 in equity” was costing him almost $200.00 monthly negative cash flow including the taxes, insurance, and upkeep.
How -   Jones approached the lender, indicating there was really no equity in this property and he was interested in “deeding back” the property rather than allowing it to go delinquent, bringing about a foreclosure. The lender appreciated his contacting them and working out arrangements to allow the “deed back” .
Results -   The lender did not have to foreclose on the property and Jones got out from under a big negative on a small property.

When -   When you have a note on a friend or relative or perhaps a client and they are not making the payments . You also do not wish to push for the payments.
Situation -   Jones’ friend Smith owes him 425,000. Jones took back the mortgage on Smith’s property. However, he does not wish to lose Smith’s friendship over his not making payments.
How -   Jones exchanges this note on which Smith is supposed to be making payments with Johnson who happens to have a $25,000 note on a client of his who is not making payments. By exchanging these notes, (or purchasing each of the notes at a substantial discount) the acquiring party can put pressure on where the other or the original owner did not wish to do so.
Results -   People will usually pay a stranger where they will not pay a friend!

When -   If you are going to buy a mortgage, trust deed, or contract that has a balloon payment or a long term pay out, the discount can be extremely heavy. This often makes the seller reluctant to sell. In many instances, however, the purchaser can purchase a 3 or 5 year income stream just buying the payments for that length of time at a lesser discount and get a greater yield giving the seller the balloon payment or long term payment to repay.
Situation -   Jones was interested in purchasing Smith’s note which was written for a 10 year period with a balloon at the end of the tenth year. Payments were $100 per month, interest only, at 12% with the entire balance due at the end of the tenth year. Jones wanted to buy at a yield of 24%. With this kind of a situation, Jones would only pay Smith $ _______ for the note.
How -   When Jones finds that Smith will not sell the note for the above amount, he refigures his offer just offering to buy the $100 payment for a period of 10 years leaving the $10,000 balloon for Smith. He can now pay Smith $_______ for the income stream leaving Smith the benefit of the $10,000 balloon and still retain the same yield.
Results -   Smith now is interested in selling the income stream and will obtain a great deal more for the note overall then he would just selling the entire note.

Situation -  
Jones and his wife are a young couple just getting started. They don’t have a and down payment and don’t qualify for the loan on a house they would like to Situation - own. Smith is an investor who likes the benefit of real estate ownership and shelter but doesn’t want management.
How -   Smith and Jones agree to purchase the home Jones wants. Smith puts up the down payment and qualifies for the loan. Jones then “rents” the house for the payment and pays all taxes, insurance, utilities, and any and all repairs. The lease period is for 5 years with the contract between Smith and Jones stating that at that time the house would be appraised and Jones would pay Smith all of his down payment, plus ½ of the appreciation.
Results -   Smith has a 50% equity getting all the shelter and 50% of the growth. He has no management. Jones gets the house he wants and 50% of the “growth,” at the end of the 5 years Jones can qualify for a new loan.
Danger -   In some cases, such as divorce, the occupants of the property have sued the investor for “their share” of the growth even though they haven’t lived up to their part of the bargain and gotten it. The author believes a “lease” with “option to buy” may be a better vehicle for all. Consult your attorney!

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