REAL ESTATE OWNED BY A LENDING INSTITUTION

WHEN You have large equity or free and clear property you cannot borrow against but need cash.

SITUATION Jones owns a $100,000 free and clear parcel of five acres near the edge of town. He would like to keep it but in the meantime need immediate cash.

HOW Jones approaches a local savings and loan and offers to exchange the land for two $50,000 condominiums the lender had taken back through foreclosure. He then offers to buy back the land provided that the savings and loan, or another lender, will lend in $80,000 on the condominiums. He agrees to buy back the land for 30% down and "sweetheart" terms, $30,000 cash down, 8% interest only, payment quarterly for three years, the 10% interest only all due in five years.

RESULTS Jones generates $50,00 in cash, has $20,000 equity in depreciable assets, and $30,000 equity in his own land with a new, higher basis.