Working with people om pre-foreclosures

[promortplanner]

I have in recent months been looking at the possibilities of buying homes in pre-foreclosure from distressed sellers. I would purchase, lease back to the sellers for 1 year, and sell the property on the open market giving the original owners the first right to purchase the property back.

There are many ways to structure (purchase lease back options) these deals, and recently gone through the rigors of finding an attorney to draft contracts and disclosures up for me.

In an attempt to limit liability if/when I engage in this business, do you think seeking an attorney is overkill or the right thing considering the expense?

Do you seek out so-called real estate investment gurus?

Are these so-called real estate gurus the real deal or a bunch of crackpots?

Does anyone have any thoughts on equity splits, set sales prices, and stategies for effectively engaging in these types of transactions while limiting legal disputes & liabilities?

Let me know any of your thoughts

[OregonLO]

I'm actually getting into this same thing in Oregon with my Brother. We're going to set up a corporation to do it under to further protect us. I wouldn't say an attorney is overkill. You want to protect yourself and your investment to the fullest so it is a expense I'd be willing to pay. I wouldn't be buying any books from "gurus" I do happen to know a person who does stuff like this and is good at it. He actually teaches classes at the local university. Any knowledge you can get from someone is going to help you with this venture. I'd say seek out all the knowledge and learn as much as you can.


Good luck.

[mypeople]

yes, i agree. i think an attorney is a wise decision. of course you want to make sure you find a good one though. :)

[Matthew-HTDI]

There are many Brokers and Realtors on our program that include having them enrolled in our service for that year as part of the lease back terms, that way, there is a real possiblity that they could actually buy it back from you after the year!

[berniecmps]

When buying foreclosures at auction, one contemplates buying lots of them a year—flipping them for profit as fast as possible, especially here in California. Thus the need for a versatile, safe method of holding title to property, without the threat of creating any inadvertent clouds on title during your holding period.
Therefore, for speed of creation, privacy, and no annual fees most foreclosure pro’s in this area use the title holding trust format. And most of us want to use a separate trust for each foreclosure purchase for the added benefits of a low profile, diversity and liability containment.
It’s undeniable that investing in foreclosures presents an above-average risk to possible lawsuits. An excellent way to stifle vexatious litigation at the onset is to telegraph that there’s “no getting blood from this turnip”. And the absolute best device for that chore is the Limited Liability Company (LLC).
So, if we combine all the benefits of the title holding trust, along with the litigation shield of the LLC, we can utilize the best attributes of both entities.
I particularly like to hold title in trust, with an LLC as both the trustee and beneficiary of all our various trusts. That way we achieve the unfettered use and versatility of a trust within the stronghold of an LLC and can use it in conjunction with an untold number of different trusts. So we end up just paying one $800 yearly fee to the state for our master LLC, neatly avoiding the annual assessment of thousands of dollars in superfluous fees to California’s Franchise Tax Board.
When you have partners, have each one create their own LLC. Some states, like California, allow a one-man, limited liability company. That way each partner’s own LLC could hold their prorata share of the beneficial interest in each trust property they're invested in. Your master LLC would be the trustee for all the individual property trusts and would execute a separate Foreclosure Joint Venture Agreement with each partner’s LLC.
It's also noteworthy that IRS treats a single member LLC as a pass-through entity. Thus there's no tax complication for your investors, as a consequence of using the LLC.
Since it's so simple to create an LLC on-line, you might want to start there.

Thank you to my good friend Peter, and trusted attorney for this information, as he said he was tired of charging me for setting these up.
(Peter is a family friend who I have known for years, plus I send him a lot of business.)

A bit of a disclaimer though: I DO RECOMMEND AN ATTORNEY WHEN JUST STARTING OUT AS THIS WILL PROTECT YOUR ASSETS!!!!!!;)