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When you are buying a home for your family to live in while you are participating in another industry supporting your family, we would highly suggest using Realtors, Lawyers, mortgage brokers, appraisers, or any other services available.
If you consider yourself an investor seeking to build wealth in Real Estate, then it is a MUST to eliminate unnecessary expenses. Let us define what is an unnecessary expense: Something you can do on your own !
Example: Realtor - If you are an up and coming investor, it is crucial you realize that paying out HUGE commissions when buying and selling real estate is self defeating when trying to build wealth in real estate. When observing what a Realtor does and how expensive it is, there comes a time when doing multiple deals where huge savings can be obtained when completing this task on your own. Accomplishing the sale of your home can be done as easily as advertising it on Kijiji and arranging showings. As we know, when someone shows interest, we simply fill out the offer to purchase agreements. Now that you know what Realtors do, how they do it, and know all the tools available to you in order to independently meet the objective, a Realtor would be classified as a unnecessary expense saving you tens of thousands of dollars every year in your real estate investment endeavors.
When a Lawyer is looked at in the same fashion, we can also consider him an unnecessary expense but only when when we understand what the Lawyer does, what tools he uses and whether those tools are accessible to you as a private buyer.
What does a Lawyer do in a Real Estate Deal?
Have you ever asked yourself this question?
Does he find the home well below market value? No, the Lawyer does not do that !
Does the Lawyer help sell the home? No, the Lawyer does not do that !
Financing is THE most important thing in the Real Estate Industry - Arranging for it.
But no, the Lawyer does not do that !
What does the Lawyer truly do in a Real Estate transaction?
Answer: Conveyancing
What is conveyancing?
Conveyancing is between the buyer and seller, and it is simply the exchange of funds, and the asset being purchased.
In real estate, private investors have been executing conveyancing on their own long before Lawyers were expected to participate.
The system provided to the Canadian public / private investors to be executed is called the Torrens system and has existed long before Lawyers have been providing this service. The Torrens System is executed at the Land Titles Office. Therefore, the Lawyer is simply getting between buyers and the land titles office and charging thousands of dollars where you can do this yourself. The average cost to execute this yourself is $150.00 where as a Lawyer can charge anywhere from $1,500 - $3,000 to you the buyer and another $5,000 - $15,000 to the private lender depending on the amount of the mortgage.
Learning to use generic "fill-in-the-blanks" paperwork that has been created by the Land Titles office is necessary in learning when building wealth in real estate. To continuously do deal after deal, and pay a Lawyer and his assistant to fill out the paperwork for you would be deemed an unnecessary expense once you understand the process and how to do it. It is truly as simple as standing in line and receiving direction from one of the clerks working at the Land Titles office front counter.
How much money is really saved when eliminating unnecessary expenses such as Lawyer fees?
When buying and selling a home, there are three real estate lawyer fees, one for buying and one for selling. What many buyers fail to realize is that the lawyer as well charges the private lender to simply transfer the borrowed mortgage funds from his account. This costs the private lender / deal anywhere from $5000 - $15,000 depending on the size of the mortgage. Simply learning how to fill in the blanks at the land titles office allows you to eliminate Lawyer fees saving tens of thousands of dollars per deal.
How can the private investor do this independently and eliminate unnecessary expenses such as Lawyer fees?
It is simple ! ALL DOCUMENTATION is provided on the internet.
You would simply print the Land title transfer form via the internet from the Land Titles office website (All forms are listed there). To complete this transaction you will only need your signed mortgage documents and the following two forms:
1. Form 28 (Transfer of Land)
2. Document for registering the mortgage you signed.
At this point, the only value the lawyer offers is the correct order in which to execute the forms.
What is the correct order and why?
Here is an Example to help you further understand: A home in foreclosure has two mortgages on it. The first mortgage and the second mortgage is the present owners mortgages. They would have signed for those mortgages, not you. In any conveyancing process, once all paperwork is signed and provided to the private lender, the private lender would now register the mortgage you signed against title.
The mortgage you signed is now registered on title in third position securing the first mortgage position for your lender once he pays out all encumbrances. At this point, you would be registered as the new owner. Why is it done this way? It is to secure your private lenders first mortgage position once he pays out the first and second mortgages / encumbrances registered on title. Once he pays out all encumbrances on title, the previous owners mortgages are popped off with your lender sitting in first position.
This conveyancing technique ensures that the property cannot be sold from underneath you while making sure no other mortgages can be registered against the title while securing ownership of your new revenue property.
This allows the private lender to secure an interest in your new revenue property since he is officially now an affected party. The reason you would be placed on title as the new owner in any conveyance is in order for the mortgage you signed to be registered against your new revenue property. You the borrower must appear as the official owner on title. For this to be done in any other order would make no sense since this would mean your mortgage would be registered against someone's property.
When completing our own conveyancing, it only makes sense that all deposits and down payments owed to the seller is paid by the buyer / you in order to be registered as the official owner on title. Once you are on title, the deposits are held in trust by the financier in order to complete all conveyancing by paying out all registered encumbrances against title.
You can now understand conveyancing from a different perspective.
Now that you know Lawyers simply complete conveyancing, and you know what conveyancing is, and we know where all the tools are available to complete the task.
By definition, Lawyer fees are unnecessary expenses to real estate investors wanting to build wealth in real estate.
Here are some key points that appear in the foreclosure deal contracts voice-over. These points should be more attractive now that you understand the important of us doing our own conveyancing and the benefits it offers to all parties. The true benefit when completing our own conveyancing is to further the already well negotiated foreclosure purchase profit.
In all of our foreclosure deal contracts, the following appears:
Section 3.1 All deposits shall be delivered in trust to a numbered company in control by the financier. The financier will be holding the deposit. Initial deposits are refundable if you are not able to obtain financing. The additional deposit is only collected when you are approved by the lender and the financing condition is waived. At this point in time you will be officially placed on title as the new owner.
Why does the financier hold the deposit?
In order to obtain great deals in foreclosure while securing funds for future deals, private financing is a must. Please keep in mind when the foreclosure wholesale consultant firm (who appears as the seller on this contract) bought the home, they made an agreement with the private financier that all deposits are to be held in trust by the financier.
In conventional real estate dealings, the deposits are given to the seller who then forwards it to the lender or lender agent together with the mortgage funds to pay out encumbrances on title. In a private real estate deal, allowing an individual who is experiencing foreclosure to hold the deposit is never a good idea. Therefore, forwarding deposits straight to YOUR lender who requires it to pay off all encumbrances to complete conveyancing is the safest way to go.
In any real estate transaction the lender, or lenders agent always collects deposits and together with the mortgage funds YOU are borrowing, pays out all encumbrances on title. This by definition is conveyancing. Please note that lawyers charge private lenders $5000 - $15,000 to simply transfer the private mortgage funds from their account. Without eliminating these unnecessary expenses, building wealth in real estate could never be accomplished.
Therefore, any deposits given to the seller will be directed to the financier to be held in trust.
Section 3.3 Additional Deposits - All additional deposits shall be delivered in trust to the same numbered company as the initial deposit.
The additional deposit is only collected when you are approved by the lender and the financing condition is waived.
When all additional deposits are paid, you would be placed on title as the official new owner of the property.
Please note that later in this contract it states clearly in section 8.1 (e) "The buyer agrees to allow the financier to complete the conveyance, only if the mortgage has a condition stating the buyer will be placed on title and the first mortgage payment is not due until the conveyance is complete." Conveyancing being complete is defined as the following: Once every encumbrance holder has provided proof of ownership, and funds are forwarded to the rightful owner of the encumbrance / debt, conveyancing is then considered complete.
Now that you are on title as the new owner and the mortgage documents you signed are registered on title, you are entitled to collect rent lawfully with integrity via contract law.
The result is 100% positive monthly cash flow for 6 - 18 months. Example: If the monthly rent was $1750 and you signed a contract with your lender which stated that the mortgage payment is not due until conveyancing is complete then you would be collecting $1750 at the end of each month without having to pay a mortgage payment until conveyancing is complete.
Please make sure when signing the mortgage documents that it states clearly you do not have a mortgage payment until the conveyancing is complete. To help you reassure this happens, when mortgage documents are sent to you, it will be accompanied by a voice-over reiterating what section in the mortgage documents states "the private lender agrees there will be no monthly mortgage payments due until conveyancing is complete". This allows you, while conveyancing is being completed to collect the rent and create 100% monthly cash flow lawfully with integrity via contract law.
Closing
Section 4.1 - The closing day is the date in which transfer of title is complete with all down payments paid in full and the mortgage documents you signed are registered on title. You can see now that the mortgage papers you signed plus your full down payment equals payment of the home. At this point, the private lender would be simply requesting for all encumbrance holders to provide proof of ownership of the appropriate debt. The private lender then forwards the funds to the rightful owner of the encumbrance holder / debt in exchange for proof of ownership. Once every encumbrance holder has provided proof of ownership, and the funds are forwarded to the rightful owner of the encumbrance / debt, conveyancing is then considered complete.
The longer conveyancing takes, the better for you !
Conveyancing can take 6-18 months to complete But keep in mind, the longer it takes the more positive monthly income is collected by you !
If the rent is $1750/month and it takes 6-18 months to complete conveyance, you would stand to collect $10,500 if conveyancing only takes 6 months (6 months X $1750) but if it takes 18 months you would collect $31,500 (18 months X $1750) BEFORE making your first mortgage payment !
Coupled with the fact that you are purchasing the home well below market value due to allowing the previous owners to stay as tenants makes a GREAT DEAL !
Now that you are on title as the new owner and the mortgage documents you signed are registered on title, you are entitled to collect rent. Please make sure to be assured the private lender has signed an agreement stating you do not have a mortgage payment until conveyance is complete. This allows you to collect the rent without a mortgage payment lawfully with integrity via contract law.
The closing date is the day your 100% cash flow begins.
So remember! By using private financing and all parties doing the conveyancing together, larger profits are truly impossible !