All-Inclusive Trust Deed or Mortgage
By Al Lowry
An all-inclusive trust deed or mortgage is also sometimes referred to as a wraparound or overriding trust deed or mortgage. This is a trust deed or mortgage that is subordinate to, yet includes all the encumbrances to which it is subordinated. But sometimes in connection with refinancing. It is easier to illustrate than to explain.
A few years ago, I knew an owner who wanted to sell a property on which he was paying off a twenty-five year loan. The unpaid balance was $30,000. He was paying 6% interest. He found a would-be buyer, and the two of them agreed on a price of $60,000, with the buyer to put up $10,000 in cash, leaving $50,000 to be financed somehow.
One possibility was for the buyer to try to refinance the $30,000 first mortgage with a new, larger loan. However, the money market was tight at the time. Any new loan he might get probably would not be for more than $42,000 and would cost him 10 percent interest plus at least two points. In addition, there would be a prepayment fee on the existing loan equal to six months’ unearned interest, or another $900.
A second possibility is that the buyer might assume the $30,000 existing loan and have the seller carry back a purchase money second trust deed or mortgage for the remaining $20,000 of the sales price. The interest rate could be whatever the buyer and seller agreed on up to the maximum legal rate, which in their state was 10 percent at the time.
A third possibility (and the one they finally decided on) was to use an all-inclusive deed of trust. The buyer gave the seller a promissory note in the amount of $50,000 with interest at 8 ½ percent. The note contained a clause to the effect that it’s face amount included the unpaid balance of the first mortgage, and that the seller would still be responsible for making payments on that underlying obligation as it stood. So the seller was in the comfortable position of receiving interest at an annual rate of $4,250 (8 ½ percent of $50,000) while paying out interest at an annual rate of $1,800 (six percent of $30,000), thereby netting $2,450, or 12.25 percent on the $20,000 difference between the two notes. This is 2.25 percentage points higher than could legally have been charged if he had carried back a $20,000 purchase-money second. The arrangement put an extra $450 per year into his pocket.
The buyer made more money too. He avoided completely the $900 prepayment penalty and some $1,000 in loan-origination costs he would have incurred if he had taken out the new 10 percent $42,000 mortgage. Furthermore, he ended up paying 1 ½ percentage points ($750) less annual interest than he would have paid on a new first and second totaling $50,00 fortunately, the option to use an all-inclusive note is limited to cases where there is no acceleration or other alienation clause in any of the notes or mortgages against the property, or if there is such a clause, the lender agrees to waive it. He will seldom waive it unless he has little to lose by doing so. In that case, the borrower may also have little to gain from the lender’s willingness to allow the loan to stand intact. When there is no clause in the existing loans that blocks them, all-inclusive loans can be good to use when:
1. There is a locked-in loan that cannot be paid off – at least without severe penalties.
2. The buyer is a poor risk and is making a small down payment.
3. A property is overpriced and the seller sticks to the price but not to the terms of sale.
4. The existing loans are at lower interest rates than you could get on new financing.
5. There is little time to shop for new loans and little chance of the buyer’s qualifying for them.
6. The down payment offered is so low that the only practical alternative would be for the seller to carry back a large purchase-money mortgage.
There are so many ways to make money with real estate.
Albert Lowry is an authority on real estate investing and a nationally recognized lecturer. One of his 20 books, “How You Can Become Financially Independent In Real Estate”, was on the New York Times Best Seller List for three consecutive years. He has a Doctorate in Business Administration, and taught the first Masters Degree Program in Real Estate.
Albert has bought and sold hundreds of properties, run multiple corporations and started many of the investors associations throughout America. He has taught over 350,000 students worldwide and is in the Academy of American Exchangers “Hall of Fame”.
Is Timing The Real Estate Market Possible?
By Fuquan Bilal
Can investors really time the real estate market, or is it wiser to just consistently invest, and hold?
We all know that there can be fluctuations in real estate prices, even if values are constantly going up over time. So, is it possible to time the market? If so, what does it take? What’s the best way to do it?
Why Try to Time the Market
Trying to time the market is critical in publicly traded stocks. Stocks are now believed to be 70% or more overvalued. It can take a decade or more to recover from that, just to get back to par. There isn’t anything you can personally do about the stock prices. You just have to wait. Worse, there is no downside protection. If it goes too deep, there is a PR scandal or the industry changes, all capital may be lost. It is vital to sell before the market begins to dip, and buy again before it begins to go up, if you want to avoid negative returns.
Real estate is a little different. You can absolutely find greater bargains during tougher times, and sell high in bullish times. This strategy can absolutely help to maximize returns.
However, real estate is a tangible, hard asset, that will be there no matter what. It can also produce income, which doesn’t vary much as asset prices fluctuate. Plus, you can control the value of your real estate assets with improvements and repositioning.
Reasons Not to Try and Time the Real Estate Market
There are two main reasons that most individuals and investors shouldn’t try to time the property market. The first is that investors are notoriously bad at it. Most almost invariably wait too long to sell, and end up folding at the bottom of the market. Then they wait far too long to buy, and miss all the gains.
The second reason is that transaction costs can be high. Between time spent on due diligence and hard closing costs, you stand to lose a decent chunk of change if you sell and rebuy the same property in an effort to time it. Depending on where you are, and the fluctuation, this may be more of loss than if you just held, and received income from the property in the meantime.
Factors Involved in Timing the Market
There are an enormous amount of data points and factors to watch when trying to time the market, including:
- Affordability
- Interest rates
- Treasury bond yields
- Taxes
- Rents
- Building costs
- Seasonal fluctuations
- Supply and new constructions
- Default rates and bank balance sheets
- Days on market
- Population growth and migration patterns
- Jobs and wages
- Local economic trends
Best Moves
There is a lot to know, learn, master and monitor to effectively time the market. If you are epically good, you can do far better than most in timing the market. Even then, you may not want to sell all your holdings, as you’ll probably want to reacquire them within 48 months or so.
At NNG, we leverage a strong research team, deep data that is way ahead of what the public sees, and maintain a strong mix of assets and strategies, so that some are being turned at their ideal timing, while others are held for consistent yields
Investment Opportunities
Find out more about investing in secured debt and real estate, go to NNG Capital Fund
What’s Your Best Investment Strategy?
By Ramon Tookes
Real estate investing is and will always be one of the best ways to build wealth. As with any investment, you must have a strategy. In real estate, three main strategies are wholesale, buy and hold, and fix and flip.
Most people think that fix and flipping is my favorite strategy, but it’s really not!! My favorite is buying and holding. I really enjoy buying and holding for several reasons. One, buying and holding creates long term wealth also known as generational wealth if properly managed. My goals include leaving a legacy and properties for my children and my children’s children and so forth. This is the strategy for that. Two, buying and holding gives you the opportunity to control real estate, which is not being made any more. Three, the properties should and usually appreciate (increase in value) over time. Finally, when you buy and hold properly, you can create cash flow for saving, investing, and financial freedom.
I enjoy wholesaling. Wholesaling is making a fee for finding a property for a buyer that will successfully execute their goal. This can be done with assignments and double closings. I like this strategy because it takes away a lot of the responsibilities and stress of ownership. Wholesaling can lead to quick profits. If you are building a wholesale system, it requires hard work, which most people that want to wholesale fail to realize. There are lots of fast moving pieces in the wholesale business especially in this market. I have wholesaled hundreds of properties during my career, but have had the most headaches using this strategy.
And yes, I do enjoy fixing and flipping. I am known as “Mr. Flipology” because I teach/train investors how to properly flip real estate through my investing educational and training course called Flipology 101:the Bootcamp. This not only includes single family residences, but also land, multifamily, and commercial. I enjoy flipping because it leads to large profits, build communities, and I get a satisfaction of seeing a homeowner own a property that they love. As with the other strategies, to successfully flip, you must create systems. These systems involve lots of other people including contractors.
These strategies are implemented according to your preference and what you can use most effectively. Do not try to use one of the other because someone else is using it. Many of the properties that I wholesaled or flipped I wished that I had bought and held them. I know that this is after the fact, but most people who have built massive wealth in real estate have done so through buying and holding.
Ramon Tookes is a real estate investor, coach, author, wealth builder, public speaker, radio celebrity and developer with 20+ years of experience in the industry. Ramon currently oversees the daily operations of The Tookes Group, a firm that he founded in 2005, specializing in real estate investment consulting.
Connect, Invest and Retire Rich
By Anita Cooper
For most investors, it starts with the dream.
You know the one…financial (and time) independence through investing in property?
While real estate is a fantastic wealth creation vehicle, you’ll be spinning your wheels a lot if you don’t have the right connections in place to get things done.
Yes, in real estate, success often depends on who…not just what…you know!
Everyone tells you that it’s important to build a team when investing in property, and that’s true, definitely.
But wouldn’t it be easier if you simply had a single contact instead? Someone who could “connect the dots” between what you need and who can help meet that need?
Meet Holly Lynn of Bay Area Multi-Family Meetup. She’s that “someone” who can help you make the connections you need to build your wealth.
“My database is global. I know 20 people for every 1 subject, so when people contact me, I can connect them with the right person for their needs.”
Holly works with a variety of investors, everyone from individual investors to groups of investors, helping them obtain the finance they need to get the results they want.
Specifically, investors can look to Holly for their private lending needs, and for opportunities to build their team by attending networking events such as at her famous mixers.
“The feedback I’ve been getting from investors is amazing,” says Holly. “We offer loads of information that helps investors grow their knowledge. I’ve also been able to connect investors with people who help them get fantastic results!”
Your network begins here
Often, you’ll meet someone who is amazing in the real estate industry but is an average, or sometimes even less than average networker.
Holly, however, is one of those rare individuals who is a rockstar at networking, and a whiz at real estate…a powerful combination for any investor looking to grow their portfolio.
Why does she do what she does?
“I am passionate about helping people take back their time. Look, I haven’t worked a retail job since I was 19 – I want others to have the same opportunity.”
Face to face connections
Holly Lynn is all about making connections.
But it’s not just what she does…it’s who she is, and when someone has that level of passion they love to share it with others every chance they get.
One of the most popular, and effective networking avenues is to face to face…even in this modern, social media age.
So to help investors, each month Holly offers a mixer where she serves as a bridge helping investors connect with people they need for their investments and deals.
Social media connections
Holly’s social media accounts are ablaze with activity too – people share what they’ve been able to do, the goals they’ve reached and the connections they’ve made.
“Social influence is definitely me. That’s how I connect people. I make calls constantly to get to know people, then I connect the dots. I know who is looking for what, so I make the connection, get them together and enjoy watching the results!”
Her reputation is seen in the lives changed…
“Holly Lynn is a personable and well connected real estate investor and professional that brings deals together for a win win outcome.” – B. Sharma, Investor
“If you’ve been waiting for an opportunity, maybe this is it
As “The Real Estate Investor’s Lawyer” I have spoken in front of many real estate investor clubs. Holly’s investor club had some of the highest quality attendees I have ever seen.
They are engaged, experienced and actually doing deals and/or seriously interested in doing deals. I give her a lot of credit for attracting that high quality of real estate professional.
I have also had the privilege and pleasure of representing Holly and have been very impressed with her and her real estate investing activities.
They say that opportunity never knocks twice. There’s even a parable of how opportunity is a bald man with a long beard. You can only grab him when he’s in front of you and you can’t get him back once he passes you. If you’ve been waiting for an opportunity, maybe this is it. – J. Lerman, Litigator
The 10 Most Common Questions I’m Asked About Probate Investing
By Sharon Vornholt
I love working in the niche of probates, but that’s not true for all investors. I think the reason is they just don’t have the knowledge they need about probate investing and how the process works. Probate investing is not that much different than other niches, but because the property is part of an estate that seems to make a difference in the way people feel about it.
Why Do I Love Probates So Much?
Here is the main thing to remember about probate investing:
The heirs rarely want the house; they just want the cash sitting in that property. If the house happens to need a lot of repairs or updating it is an investor that can solve their problem so they can go on with their life.
Folks Have a Lot of Questions
People have a lot of questions about probates. In fact, I am asked the same questions all the time.
Today I decided to take the 10 most common questions I am asked about probate investing and answer them. Many of these topics could be (or have been) entire blog post or video so today you’ll be getting the “short version”. I plan to take some of these topics and elaborate on them in the future.
#1. Why Is There Less Competition in the Probate Niche?
There is less competition for several reasons.
- A lot of investors just think it’s just strange working in this niche.
- Others just don’t know the process and how they fit into it.
- Another reason is they just aren’t willing to do the work involved to get the information needed to get those leads.
If you want to jump into this very profitable niche, take the time to learn about the actual probate process and about probate investing in general. You are going to find that these folks are some of the most motivated sellers on the planet.
#2. Why is it So Hard to Get Probate Leads?
The reason it’s so hard to get the information is because the process is different everywhere. This is also the reason there is less competition. There are over 3300 counties in the US and each one of those counties has a different process for getting probate leads.
When you think about probate investing, the reason this niche is so great is also the reason a lot of people won’t go to the trouble to learn the process for getting leads in their area. It’s not always easy. Just know that you may have to do a little detective work.
#3. I Feel Bad Profiting off of Dead People or – Isn’t it Weird Talking about Dead People?
I hear this comment all the time. Sellers are all pretty much the same. It just so happens that folks in probate are there because someone died. They are also there because they have a problem; they have house they need to sell and that’s why the need us. We are there to help them solve a problem. It really is that simple.
Remember this: The sellers of probate property don’t want the house; they want the cash from the sale of the house.
#4. Why Can’t I Just Call the Family Instead of Sending Direct Mail?
My initial contact is never by phone. I always send a letter to the executor/administrator. If you think about this for a minute; how would you feel if someone called you out of the blue when your loved one passed away? You wouldn’t like the intrusion.
These folks will call when they are ready. Some families will dive right in and open the estate. Other people may wait a year or longer. Generally speaking, when they open the estate they are ready to move forward with the sale of the property.
#5. Can You Wholesale Probate Deals?
Absolutely!
Any real property must be sold before the estate can be closed. In most states you just put the property under contract and move forward. Be aware that some states like California have a very different procedure. You will need to learn how the probate process works in your state. (Remember that detective work?)
#6. Don’t Most Probates Want Retail for the House?
Some sellers will want retail and some won’t. When you think about probate investing, these sellers are no different than any others. Houses that are in great shape will generally be listed on the MLS. Properties that need repairs and updates are the likely candidates to be sold to an investor.
#7. Can You Use the Multiple Offer Strategy for Probates?
You can, however you need to remember that these sellers almost always want to “cash out”. That’s the main reason they are so motivated. They just want the cash. There may be rare occasions where they will be willing to do owner financing or some other type of creative deal but that isn’t typical.
#8. What Can I Say When the Family is embarrassed about the Condition of the House?
Truthfully, this happens all the time. As a member of the family walks through the house with me they are apologizing because there is so much “stuff”. If you are sincere, it’s pretty easy to put the seller at ease just by telling them this is typical especially when the deceased is elderly.
It’s not unusual to see stack of butter tubs, receipts from decades past and just a lot of junk. You may also run into some hoarders. Remember to always offer to clean out the house for them. That’s often the one thing that will seal the deal.
#9. What If the Deceased’s Relatives Won’t Move Out of the House?
The short answer is let an attorney handle this problem. Just get the house under contract. Your real estate attorney will know how to take care of this.
#10. What Can I Do When the Heirs Don’t Agree?
When you are talking about probate investing, things usually go smoothly and the closing is typically uneventful.
However … there are times when you feel like the peacemaker/counselor/teacher. People will need to be educated about the process. So in many cases, you will be there to initiate problem solving conversations with the family and to help soothe hurt feelings. After years of working in this niche, I have found that you usually just need to be a good listener.
Sharon Vornholt
Sharon Vornholt is the owner of Innovative Property Solutions, LLC in Louisville, KY.
Sharon owned and operated a successful home inspection company for 17 years. She began investing in real estate in 1998 and became a full time real estate investor in January of 2008.
Sharon specializes in wholesaling, and is also an experienced landlord and rehabber.
In addition, Sharon is an internet marketer and also writes articles for several national real estate sites. Sharon is the author of a popular real estate blog called the “Louisville Gals Real Estate Blog”. For your FREE REPORT “Probates and Absentee Owners: Your Fast Track to Real Estate Riches”, stop by her blog at: http://LouisvilleGalsRealEstateBlog.com.
