tgaspard

One more question. Therefore if I understand correctly, both a form 1098 and form 1099-OID is used to report both interest? Is that correct? (For your example $478.02 would be reported on form 1098 and $71.42 would be reported on form 1099-OID). Is that correct? Todd

Ah!!! Thanks a million Dave Todd

I receintly bought a first position note secured by a mortgage. The note is worth $99,750 over 12 years at 9.5% interest and I bought it with a $20,000 discount. All is fine and the buyer pays every month. Here is my question. I know how to handle the interest taxes for both the home owner and myself being the lender. I'm just not sure how do I report the $20,000 discount. Do I report that as a capital gain now? Or Latter? Or do I have to report that in my personal tax braket. Must I report this gain now or once the loan is fully paid? Thanks Todd

The concept was made into a great movie called, "The Spitfire Grill"! It is worth the rental fee at blockbuster!

I really don't think Adam needs a timelimit placed on him! He's been pretty sucessful, shares a wealth of knowledge, and really does'nt need to prove anything. I hope you two get a deal done. In my eyes, both win the challenge if a deal is done - but mostly for you Doug. GOOD LUCK and keep us posted! Todd

Wow! A challenge and the challenge was accepted - now this is an interesting thread! Todd

Jimmy How about a slight modification. Don't buy outright, yet put your sign in the yards of many sellers. Tell these sellers that you will buy their house only if you can fill the house with a T/B who is willing to pay me 10% more. Now if you get a T/B then you tell that same seller, "I have a buyer ready to pay 10% more for your property - I can buy it right now or offer this investment package to you Mr. Seller". Thus do a CA with the seller or buy it outright or find another investor. Doug - why have 5 investors bailed on you? Todd

For those who always wanted to know if you can do these kinds of deals in your IRA. I went to a talk yesterday by Quincy Long. He is an attorney and owner of the Houston branch of "Entrust". Most of us know that you can buy real estate in a IRA when used with a third party custodian. "Entrust" is one of a few third party custodian. I pushed my hand up and he answered "yes, you could do a sandwich deal in an IRA". In-fact you pretty much could do anything in MC's book within your IRA. He even had gave out a written example of a option placed on a property which was then assigned for profit in the IRA - tax free. Sounds to good to be true? Well, in fact it might be to good to be true. I sent him the following email today concerning UBIT (unrelated business income tax). And here is his answer He then further replied with this So really the answer is yes and no. You can do these kind of deal in your IRA - just don't make it look like a business. The IRS still want to tax you on intent! If their "read you mind" machine says it looks like a business then you must pay a tax. You just never know what the IRS is going to do. Make a lot of money in your IRA and they just may come after you! Todd

Doug, Gene, MC Gene, I agree with Doug. I love that quote Doug - I had not heard of that before. One more problem with getting buyers first. I've heard the argument that you are now behaving as a realtor. Especially with a CA, you are putting a T/Ber and the seller together upfrount before you sign anything. Yes when it is time to sign you may be the princible, but one could argue that being a principle for 60 seconds is really skirting around the problem of what your are really doing - that is behaving as a realtor. MC - I never thought of it that way, but your right. What I described is basically a non-exclusive pure option. What I'm thinking of doing is to actually outright buy a property or two. Once I have a T/Ber on a pure option property (or contingent contract) I would just go ahead and buy it myself and sell it when the T/B is ready to buy. This would be an investment for me, but would also demonstrate to future investors that I'm doing the exact same thing with my money of what I'm trying to sell to them. I really don't think it would be hard to sell 100% gains on investment to investors. As Doug has said on a previous thread, even if the T/Ber does not buy on the investors property they still come out with huge gains. Doug - Nicely said - I agree with you 100% Todd

I've been thinking of a different approach when approaching sellers. Its really nothing new - I seen it here before - just packaged a little different. I'd be interested in hearing what you guys think. Assumption: You have good credit and can easily qualify to buy an investment property. Approach: Approach many sellers that are selling their home FSBO and offer them the best cash sale price that you can get from them. Sign a standard residential contract with a Addendum for "Contingent" Contract. In the addendum you state that the sale is contingent upon you signing a third party contract (you would sign up a T/:). As long as the property is contingent on you finding a T/B the seller has the right to do as he likes. He could still keep trying to sell FSBO. In exchange for this right for the seller to keep trying to sell FSBO you would pay no escrow money (no money down). Would anyone object to this? Your pretty much saying that you will buy his house if you sign up someone willing to buy from you and Mr. Seller go ahead and keep trying to sell it himself. Accomplishment: Thus what you would have is a contract that states what you would buy the property for if you were to find a T/Ber. You could place your sign on his property and if you find a T/Ber then collect the option fee up front. I don't see many sellers objecting to this approach - you could be placing your sign on many properties. Who ever sells first is the winner. Options: From here you would have several options. You can go ahead and buy with a minimum return on investment of well over 100%. (in other words if I can buy a property with $10,000 up front I'd want to get that back and make at least $10,000 in profit from cash flow and the back-end). Secondly you can sell this package to an investor - just keep option money. (I'd bet many people would buy investment packages with 100% gains on investment). Thirdly, you could sell this back to the seller. (Once you tell your seller that you are ready to buy and have a T/Ber who is paying 10% more than his price, he might want in on the action) Questions: So what you guys think of this? My major question is, on how much of a percentage I should mark up the property when looking for my T/Ber? (10%, 12%, ?). Final Points: I'm strongly thinking about doing this. Please point out the faults of this approach if you think of some. I think targetting sellers with expired listings would be great (that is 6% right there). In-fact you could even do the same thing with realtors (if they were willing to just collect seller commisions that would save 3%). All comments would be very much appreciated. Todd

I think it is important for others to see this negative article concerning lease/options. I realized that most of the negative aspects he points out can be properly addressed with some very good contracts, of which MC provides. I'd agree that a sandwich does have more risk - especially when done with someone with little knowledge and bad contracts. What you guys think? www.investinginland.com/lease_options.htm

Welcome texan I'm from Cajun country but currently been working in Houston, TX for 15 years. As yourself I'm a newbee but you've come to the right place. With the help of the people on this site I've completed my first deal (sandwich deal) and currently looking for another. Here is a thread of my first deal http://www.naked-investor.com/forums/index...?showtopic=1232 This site is the real thing and it does work in the Houston area. Also you might want to look into the Realty Investment Club of Houston (Rich) at web site http://www.richclub.org/. I've been a member from last October and strongly recommend it. You could even go as a guest if you'd like to check out the club. Todd

What do you guys think about this idea (not my idea - I heard it from a speaker on options)? How about putting into your option contract the right for the owner to terminate the contract for a fee. For example, your seller wants to keep up their FSBO sign while you look for an assignment T/B'er and cancel with you should they find a cash buyer. In-fact you could say, "Go ahead and keep trying to sell your home yourself and I'll keep looking for a T/B'er. If you find a a cash buyer then great - just pay me X dollars to cancel our contract and cover my expences." Of course you would put in your contract that this will no longer be a right once you have a T/B'er signed up. Thus you could get paid $1000 for not buying should he want to cancel. Furthermore should you find a cash buyer for the seller, you could tell the seller and he could pay you X dollars to cancel his agreement with you. Your getting paid to not buy or cancel the contract. Something to think about - I don't have the details on what this would look like in a contract - does anyone see any problems with this idea? Todd

I personally would not sign any contract with blank fields and would be uncomfortable telling the seller that we will fill the option field once I find a T/B'er. The truth is, the bigger the assignment fee you keep will net the seller less (assuming the property price is fixed). I must disagree, "it is the homeowners business as to what I make". Imagine telling the seller, "Hey Mr. Seller - I got a better deal than we initial expected. We got X dollars above what we thought we'd get and we also got Z dollars more in rent. Lets tear up that contract and and draw up a new one spliting all the additional profits". He nets more - you net more, and now he goes tell everyone what you did for him! Todd

MichaelC I have your manual and I'm also a little fuzzy on CAs. The overall concept I understand - its the exact details that remains a problem. Tony says, "leave the option $ blank and use 2 forms i.e. seperate option". Do you recommend we leave this blank on a signed contract? Is this how you do it? I was thinking you sit down with the home seller and sign everything upfront. I'd write in zero option money to the seller (or as little as possible). I would upfront agree with the seller on what kind of assignment fee I'm looking for. Now I find a T/B and assign the contracts to them. In the assignment it says, "Any assignment fee paid shall be considered option consideration". Thus I'm covered and get paid, the end buyer's payment is considered option consideration (this benefits him over just paying for the contract). Now if I wind up getting more option money or a larger cash flow from the T/B then I would see if I can split those extra monies also with the seller also. This was my thinking on how to make a CA work. Is this a viable way of doing CAs or am I missing something? Thanks Todd