1. Exchange negative cash flow for positive cash flow by selling your houses to your existing tenants with attractive seller financing with wrap around loan spreads. You already know which ones pay on time and which don’t; so sell to the good ones. In the absence of willing lenders, a growing number of desperate home sellers have started advertising their houses in trade for other, more affordable or more suitable houses. Bear in mind that when you trade your house, you’re really trading only your equity. When equities are unequal, the party on the short end either has to come up with cash, or with a new loan to balance out what is given with what is received. Some builders will happily take houses in trade so long as you can qualify for enough loan to pay off their construction loans. This could help those who can’t find the financing that a builder could provide.
As one wag put it, finding someone to trade houses with is a lot like using a dating service; while your odds might be good, the goods might be odd. It’s important that both sides of a trade accept the other’s house. It could be embarrassing to accept another house in trade, then have the other party renege. You’d wind up with twice as much trouble as before. For that reason, it’s a good ideal for both parties to use the same title and/or escrow company. It should be selected because its title and escrow officers will know how to close the transaction.
When swap partners make a deal on line, they bypass sales commissions and in many cases taxes on built in profits because Section 121 exempts gain up to $500,000 even if it comes in the form of debt relief or another house’s equity. Before you dismiss this lightly, although you might be selling for less than you paid for your home, if the funds came from the sales of prior homes that were pyramided over the years, your tax basis for capital gains purposes might be far less than the price you paid.
Brokers in many areas are recommending that sellers add “will consider trading for other property” to their listings, signs, and advertisements as well as posting their houses on the web. Some of the more popular house-swap websites that report that they have thousands of swap listings are: OnlineHouseTrading.com, GoSwap.org, DaytonaHomeTrader.com, Craigslist.org, and DomuSwap.com.
2. Sell other inventory houses on Rent-To-Own programs. Attract buyers from among long term tenants in apartment houses by offering them a credit against rents and deposits that they have paid to their current landlord.
3. Where tenants have good credit scores, use the foregoing credits to qualify them for complete refinancing of the houses to rid yourself of personally guaranteed loans.
4. To create down payments, pay cash for motorhomes, boats, expensive cars, etc. so long as this cash is used as a down payment on a home that you want to cash out. Later, sell the traded-in property by carrying back the financing on it.
5. Trade leveraged properties at bargain prices for free and clear properties for those who want leveraged, tax shelter, houses. Lease the houses back for a couple of years to guarantee an attractive level of passive rents and to eliminate the problem of management from the deal.
6. Sell for 80% of fair market value to pay off worrisome loans, but carry back a re-purchase Option at the sale price to capture the remaining 20% of your equity. Later, either hold the Option as a long term passive investment, sell it to the occupant, or to an investor such as a Roth IRA, or wait until the house sells and capture your highly leveraged profit at that time.
7. Dealers who need to avoid onerous dealer and State taxes can sell as above at their tax basis. If they hold the Option for one year, they can then sell it at low capital gains rates for cash or with seller financing; or exchange it tax free.
8. When you sell, make the deal more attractive to a buyer putting the property into a Trust, LLC, or Corporation, and selling the shares rather than the house itself. This will avoid transfer and recording fees, readjustments of property taxes, and difficulty in obtaining new insurance in areas where insurance companies are refusing to insure new accounts.
9. Approach the lender and re-negotiate your loan. There is a lot of political pressure on lenders, particularly those with adjustable rate loans that might be deemed to have been “predatory” to work with borrowers who need payment relief. If institutional lenders won’t work with you, a private lender might lend you enough to make up payment shortfalls in return for a share of the equity once he market returns.
10. Either put up more collateral or find a co-signer who will make the lender feel safer, and more willing to give you more time to sell the property or to refinance it with another private or institutional lender. Interest rates are coming down, and this might work well.
