Payment Timing

Pre qualify your tenant buyer first off.

Any pre payment or rent credit will be forfeited if payment is late.

You are ultimately responsible for the mortgage payment, the seller can foreclose on you.

Tenant/ buyer payment due the 1st. Your payment due the 10th or 15th if possible.

There is risk involved, so do everything you can to minimize your risk. A good PRE QUALIFIED tenant/buyer is the key.

You really should have several months of cash reserves in the bank to cover short term problems.

What happens if you pay your seller and he does not pay the mortgage? Do you know what to do to prevent this from happening?

Good Luck,

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

well ultimately it you that is responsible for payment to the seller regardless whether or not your tenant buyer performs. why a high quality tenant list and thorough prescreening is crutial. I personally feel before you get into holding properties you have a reserve set aside for each property for such instances and/or repairs. Unforeseens will happen.

if you dont have the funds set aside, and look to proceed inspite of; I'd suggest putting into place a line of credit. Does NOT have to be from a financial institution. If you have a PML, friend or family member with excess capital, approach with the opportunity to extending funds on an as needed basis that you would have access to with 24 hrs IF needed. They retain the funds until needed and interest starts at time of transfer. Have multiple plans to repay before you draw!!

jen

lol sorry Michael you were quicker on draw again! dang iphone! lol

Thanks for the input! If the option fee I pay to the seller is equal to or less than the option fee I receive from my tenant-buyer, I will have more than enough in the bank to cover late payments. I have a fair amount in savings.

As for how to prevent the situation in which I pay the seller and the seller does not pay the mortgage, I believe the answer is that I would pay through an escrow service, correct? If I, for some reason, did not use an escrow service and the seller decided not to pay the mortgage, I would not know what to do in that situation.

Matt, you are correct!! Never pay the payment directly to the seller.

Hi Jen! Great response! Even if I was quicker. Ha. Hope all is well.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Forgot to ask:

What if the seller's mortgage payment is due on the 1st? (In the case of a wrap-around or "subject-to" sale.) I wouldn't be able to make my payment to the seller to due on the 10th or the 15th if they need it by the 1st. What do I do then? Just cover the payment myself and hope my tenant-buyer pays on time?

Worse case scenario the answer is yes. I would try to have the seller arrange a later payment with their lender. It is pretty easy to do.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Cool. Thank you so much for the input!

ok from my understanding anytime you"re doing a wraparound mortage its consider risky if its not permitted by the lender,why because if the existing lender finds out, they have the option to call the loan due and payable immediately.another thing paying the seller directly you're only hoping that he/she will use the money to pay the mortagage. one of the option i've read in deans book is: you can use a third party escrow campany. you pay the escrow company and the escrow company pays seller's mortgage and sends check to the seller for the difference. Read BREM page 188 it will tell you a little bit more about the subject. hope that helps

You can also have the Tenant/Buyer's pmt automatically deducted from their acct and put into yours on a specific date.

Another way to do it is instead of a sandwich L/O, you do a Wholesale or a Co-Op L/O. You set up the L/O parties, have the pmts going thru an escrow company, immediately assign your contract to the T/B, collect your Option Fee and you are out of it. No further responsibility.

Karen