Florida Real Estate "Deal" - Fire away

Putting people with bad credit in homes with no money down from the person in the home - sounds like what got us here in the first place

kspeak,
Yep, it sure does sound like a way of looping over the same failed strategies of the past. It makes much more sense to me that someone would study the average rents in an area, buy a foreclosed home at a good price, and possibly realize some positive cashflow after finding a good tenant who has a job and can make rent payments but who does not have the money to buy the home.

True - but from what I understand the Florida market had overdevelopment in a way that NYC did not. There aren't even enough people to live in the houses they built (we may have bid prices up too much in NYC, but at least there is significant demand in Manhattan). I doubt rents are stable either for that reason. Foreclosures are often concentrated in certain neighborhoods, meaning the neighborhood become blighted pretty quickly putting more downward pressure on rents. Also, even if they have a "good job" almost by defnition this type of person has no savings, and in this market, losing one's job is quite likely. It's different to buy a multifamily asset (e.g., apartment building) in a low-rent area. At least then you are spreading the rent across tenants. I would be very careful.

I think the thing anybody has to ask themselves right now is this: you can buy GOOD companies corporate bonds now at incredible yields. There are going to be incredible investment opportunities arising because of this liquidity crunch. Why take on this degree of risk - especially where you are so levered to one person's future (especially a person with historically bad credit?)

Never give a sucker an even break.

There is so much that can go wrong here it isn't even funny. These scam artists are getting YOU to take on all, repeat ALL the risk. And there's enormous risk here. It's YOUR credit that will get f'd if these guys stop paying the mortgage. Anyone who would even consider doing such a stupid deal is a sucker.

kspeak,
Many good points, thank you. I don't know the situation on the ground in Florida so I would not go near the place, but that does not mean that someone else who knows the local market could not realize some profit and provide housing for someone.

I understand your point about yields on corporate bonds but I also wonder how we will stabilize and rebuild our blighted communities given the problems you pointed out. After all, we still live in the physical world, although it is easy to forget that at times.

I understand the problems you pointed out and the sense of "moral obligation" to rebuild blighted communities. But it is essentially protectionism ... unfortunately so many of these communities are blighted for a reason: they weren't built intelligently. In many cases, jobs aren't nearby; the people who are supposed to live in these places can't support a big house (energy costs, yardwork, maintence, etc.); there is no public transport nearby meaning a family needs two cars; the list goes on and on ..

This country has got to realize the "American Dream" can still exist, but we've got to invent a new dream. The 1950s model does not work anymore.

"a credit improvement program which takes 6 to 12 months" does not exist.

Squid,
Yep, the guy with the good credit gets left holding the bag and has his credit rating destroyed in the process. To say nothing of the problem of trying to evict tenants who stop paying on that mortgage. The list goes on and on.

kspeak,
Yeah, the suburban model for America has a lot of flaws but will probably hang on some more with the current decline in oil prices. I traveled to a lot of subdivisions in Bucks County, Pennsylvania for election canvassing and found nobody home at 8am during the week, not that we were knocking; we were just leaving election material. Everybody is commuting four hours a day to Philly, I guess. Their homes are about eight times the size of my apartment but I don't know how much time they get to actually spend in their homes and the costs are large...

Jerkstore
Yeah, I don't think there is a 6-12 month credit improvement program, that's a lie.

Let me get this straight -- you're buying a home, so you're legally liable for mortgage payments, and what you're actually counting on to make the mortgage payments is a pass-through from someone who is your tenant BECAUSE they poor credit in the first place?

That's like marrying a drunk knowing he's a drunk.

ali r.
{downtown broker}

Jerkstore is correct.

Plus, would you really want to have a tenant with problem credit? Because that's what you'd be agreeing to. 'Our goal is to have the tenant buy your property in 12 months' is not a guarantee, and is likely NOT gonna be realized. So, you'll be stuck with a property that may be virtually unsellable and equally difficult to rent. Also, where, exactly, is this outfit gonna find people with poor credit who happen to also have 'great job and income stability'? That sounds like an oxymoron (so to speak), especially in this climate.

And to add insult to injury, the bastards also want to take 50% of your sales profit when (IF) the property sells. Are they f'ing kidding??

Well said, Ali!

407PAS, your pal is extremely lucky to have you as a friend. Talk about voice of reason! I do hope you can talk him out of this scam.

Oh, and let me just add to the drunk analogy: It's not only like marrying a drunk knowing he's a drunk, but also believing that somehow the drunk will magically become sober in 12 months.

The biggest question to ask when hearing about any of these schemes is "why do they need me". $15k outlay? That's chump change. Why do they need it from me? If this is such an amazing business opportunity, why aren't they putting up the $15k and pocketing 100% of the profits?

The "why do they need me" question will expose a ton of scams - you don't need the nitty gritty details beyond that.

Thanks Squid, I am trying with all my heart to keep him away from this kind of deal. I have sent him a link to this thread. I hate to see people taken in with this sort of thing.

Straight deals are fine and can work. A straight deal would be where an investor buys a place as an investment property, screens the tenants, and rents it out to someone. I have rented places for a long time, always on a small scale. I will say that I do not believe there is a lot of profit in it, after you get done paying taxes, dealing with maintenance, losing rental income from vacancies, etc.

I would not recommend that anyone try this sort of thing from a distance. You need to pick the right property at the right price and rent it out to a good tenant. People can change, but any potential tenant with bad credit would have to prove to me that they had changed their life and were on the wagon, meaning that they were no longer a drunk!

Oh yeah, the 50% take of your profit is a real kick in a head. No thank you.

""Straight deals are fine and can work. A straight deal would be where an investor buys a place as an investment property, screens the tenants, and rents it out to someone.""

Right--in other words, the investor has control over his investment. Not the case at all in the deal your friend is considering.

<>

All you really need to read is this topic sentence to know without a doubt that this is a scam.

This was the topic sentence, sorry misformatted:

It's a real-estate opportunity where all you need to do is get a bank
loan for a Florida house, and then collect thousands of dollars.

You are trying to pull the wool over the eyes of the bank? Using your good credit and transferring a loan to somebody who has worse credit?

Smells like fraud.

"He says this was advertised in the Wall Street Journal and that the company is a member in good standing the BBB"

Cough!

Total scam. No doubt whatsoever.

Here is a similar scam with some of the same elements:

http://www.flippingfrenzy.com/2008/11/18/andrea-moore-and-michael-irving-found-guilty-in-10-million-foreclosure-rescue-scam/

Bingo! Nice work modern! You guys are terrific. Thanks for all your work. I knew it was a fraud but I wanted better evidence to convince my friend not to get involved in this scheme. I sure hope this is enough. I sent him the link to the last article.

1)If this is indeed a scam, how could the company maintain its good standing with the BBB?

2)In order to qualify to advertise in the Wall Street Journal, the company is first rigorously scrutinized.

3)Regarding the credit improvement in 6 to 12 months, the credit only needs to be improved to the extent that the tenant would qualify altogether for a loan. This could as minimal as boosting some score from 630 to 660. The tenants are working people such as nurses who do not have very high paying jobs, but they do have steady decent jobs. They do not qualify these days for a loan because of the tightened restrictions imposed by banks.

Regarding the topic sentence:
"It's a real-estate opportunity where all you need to do is get a bank
loan for a Florida house, and then collect thousands of dollars"
This was my own personal statement -- not that of the company.

To tech_guy:

Regarding the $15k outlay -- the customer usually does not have to outlay anything (this will vary depending on his credit) because the company itself pays the down payment -- and in addition gives the customer cash back at closing to the tune of approx $15k.

pdavidow:

1) by the time the BBB has complaints it is too late. the BBB does NOT vouch for anybody, merely tracks complaints on a lagged basis. And a search of the BBBs for central and west Florida shows NO listings for "Trademark Property Solutions", so this claim appear to be an outright fabrication.

2) you are kidding right? The WSJ will take ads from anybody and does no "scrutiny" (my "scrutiny" shows the huckster's web site uses 2 "mail drop" addresses for their supposed offices)

3) if they can't afford the house, they shouldn't buy it. you would think people would know that by now, there is no free lunch anymore.

This is a outright scam, you are planning on stealing money from either the lenders or the straw man ("dupe"). I hope you end up in jail like the people in the link I provided.

Ok everybody, be nice to my friend. People have been taken by real estate scams in Florida for as long as that swampland has been around. I guess that would date back to when the Indians got cheated out of some land. Hmmmmm, it seems like the same thing happened in Manhattan. A contract is a contract. ;-)

Anyway, I'll be out of touch for a little while but all of you guys will be in my thoughts. Thankfully, with the internet, we can save people from falling victim to these kind of bad deals. What a wonderful thing.

If somebody wants to help provide housing for nurses and and other people who do not have high incomes, that is fine. I have been a landlord for twenty years. The word landlord does not have to be a dirty word if the landlord provides services (keeps the heat or air conditioning working), keeps the place well maintained (plumbing, always plumbing problems), listens to his tenants, and tries to act in an honest and compassionate manner.

But, I will be honest and say that I have never realized much profit from renting out property. There are just too many costs (taxes, maintenance, repairs, lost income from vacancies), etc. I have met some great people along the way, some who I still call friends. Believe that or not. I have also had bad experiences, as I am sure is common.

So, if you want to rent out a place and try to earn a little money as an investor, do it locally, where you have more control over your investment and can keep an eye on it. Find some honest, local repair people who will help you maintain the place. Screen your tenants carefully, meet them in person, and try to figure out if you can trust them to pay the rent. Not an easy thing. Don't get involved in the swamplands of Florida with these guys who are running some sort of mortgage scam.

If pdavidow is your friend and not the promoter I take back the part about hoping he ends up in jail. But seriously, this "deal" has scam written all over it and someone is going to get taken to the cleaners and I hope it is not your friend.

He's my friend. Honest. I have said: "Please don't get involved." a number of times. I don't know what else I can say or what more we can show to demonstrate that this scheme is not legit. I gain nothing from saying that he should not get involved. There is no "referral bonus" for scaring people away.

[To tech_guy:

Regarding the $15k outlay -- the customer usually does not have to outlay anything (this will vary depending on his credit) because the company itself pays the down payment -- and in addition gives the customer cash back at closing to the tune of approx $15k.]

My same question still stands: "Why do they need me"? Are they a charitable organization looking for friendly people to give 15k to? Snarkiness aside, this is a very serious question. If this is such an amazing business opportunity, why do they need you? Why don't they keep it in-house and keep all the profits themselves?

Modern, you beat me to the punch. BBB only tracks complaints, which take time to process. Often a fly-by-night scam artist is long gone before any BBB reporting ever shows up. In fact, if these guys are falsely claiming to be accredited by the BBB, then they should be reported to the BBB. One can also check with the local Dept of Consumer Affairs and Atty General's office; they tend to be more up-to-date with complaints. It's likely these guys are already on someone's radar.

Modern is also entirely on the money re: WSJ advertising. ANYONE can take out an ad; the paper does not in any way back or vouch for those that do.

Bottom line--this is indeed a scam. Run, don't walk, away.

pdavidow - This reaks of being a scam. The $15K they give to the dupe probably is money from the dupe's own borrowing. The Company's outlay would also be covered by the dupe's borrowing. The Company might cover the mortgage with rents received from the tenants, or they might not, because the dupe ultimately is responsible. Therefore the Company is on the hook for nothing and the dupe is left with an increasing liability and untradable asset.

My guess is the shill (meaning you) takes the $1,000 referral fee when the transaction closes. So, you too will be paid from the dupe's borrowing and would be liable under conspiracy charges, in the least, when the scam is uncovered.

If you are an innocent in all this, get out now!