Betty Jo was a recently divorced go-go girl who was just about gone-gone. She'd set her sights on living in a swinging singles apartment house in order to find a new mate. Her present house represented more of an obstacle than an asset in her quest, but she needed the equity to be able to afford the rent for the apartment.
Don lusted after Betty Jo's house. Assumable VA loan, prime rental area, $11,000 equity. Cash flow. It was perfect. Don went to work finding a way to get Betty Jo's house.
He approached the Manager of a luxury waterfront apartment who had several penthouse apartments that had never been rented. They had mirrored ceilings, studio windows, bar and white curly carpets. They were expensive and vacant. Don negotiated a 6 months lease for $3000, selling the Manager on the idea that after that time the occupant would be 'hooked' and sign for an extension at the regular price. He agreed to secure the rent payment with a 2 year Note secured by a 2nd mortgage on Betty Jo's house.
With lease in hand, Don then traded Betty Jo the prepaid lease in return for her equity. Everything closed simultaneously. Because the 2nd mortgage effectively spread out the apartment costs, the house rents paid for both first and second mortgages. Don acquired the $11,000 house equity for the $3000 apartment rents. P.S. Betty Jo's re-married, and everyone lived happily ever after.
