MichaelC

Hi, Jim. I'm thrilled for you, and it's OK to crow about it. But, not to throw a bucket of cold water on you, I want to reel you back in. Let me tell you what I mean...... More times than I can count I have seen a novice investor get close to their first deal. Then, something happens. Maybe something they did, maybe something they had nothing to do with. But, the deal dies. Imagine the feeling of disappointment! Getting over that disappointment is the hardest part. All too often, I have seen that newbie curl up into a ball and quit. Believe me, I do not say this to frighten you. Just the opposite, in fact. I want you to remain on an even keel. If the deal materializes I'll be in Chicago the next day being treated to Lou Malnati's deep dish pizza . In the meantime, continue to pursue other deals, and continue to market like crazy. A week is a long time to put yourself on ice. In the interim you could very possibly find another.

Your observation is correct. Subject To does require more work, more paperwork, and a more motivated seller, in my opinion. In effect, you are asking a homeowner to turn over their property title to you while they remain on the record as the responsible party for payments. Meaning, if the investor fails to keep up with the payments, that homeowner is the party that the lender is coming after even though they no longer own the property. You can see why I say the seller needs to be highly motivated, much more so than a homeowner who is willing to do a lease purchase. A Lease Purchase is much simpler and quicker. But, like most things in life, there are two sides. Subject To practitioners will tell you that this method of investing and buying properties is superior because you are taking title and control. It's a judgement call and a personal preference matter. Neither one is the best way. Much depends upon the specific situation. Having the know how to work both techniques gives you the possibility to close a deal that otherwise might have gone away.

Summer, I agree that it would beneficial to all involved to try and work a lease purchase deal with this property. And, yes, you do need to work with the Realtor on this. When I've been involved in a similar situation I have opted for your number 2. If I get the deal with the homeowner I will pay the Realtor an agreed to referral fee for his/her assistance. This fee, of course, is known upfront and is negotiable between you and her. That's my preference because I want any third party out of the way when I am dealing. This way, I know my costs upfront, and there is one less chef in the kitchen. Your other suggestions are fine, too, if you have a preference for a different approach. The big picture here is, as you said, to do the right thing because a part of your success in this business is a result of your name in the community and your business relationships. What you pay now will come back many times over in the future.

We are pleased to now offer our members another new forum to further provide information in our respective real estate dealings. Member Dave T has generously offered to share his time and his experience with tax related issues, and moderate this forum. I need to make clear a few important points. First, Dave T is not a CPA, nor an attorney. He is, however, an experienced investor and very knowledgeable source of information on taxes and real estate. His knowledge about these matters is based on that experience. The opinions of the moderator are just that, his opinions. They are intended to provide accurate information regarding the subject matter being discussed. Information shared is done so with the understanding that neither Dave T, The Naked Investor, nor anyone replying is engaged in rendering legal, tax, or other professional services. If legal, tax, or other expert assistance is required, the services of a competent professional should be sought. Last, we'd like to sum up the Tax Strategies Forum with this: I strongly endorse the eminent Jurist Learned Hand who said "tax avoidance is a constitutional right". It is my belief that the Government should only take the legal minimum in taxes. In this forum, we will endeavor to provide income tax information for the real estate investor in the hope that we can assist you in maximizing your after tax profits.

Way to go, Jim! Another step closer to becoming an old, cranky pro . My advice is not to prejudge this property. I have done lease purchase deals on single family properties in the $700K range. The concept is the same, but you will need to change your approach for an upper end property. For starters, just as with any property, you will need to run your comps to determine FMV for the purchase price and the monthly rent. Assuming this gets done and the results show you have something to work with, you move on and do the deal. However, your approach needs to be cautious now. First, you will need to give yourself a marketing time frame that provides a cushion for you, Jim. The earliest I would start the lease on this would be May 1. And there would need to be a compelling reason to do so. My preference would be to fire it up on June 1. In addition, my cancellation clause would have to be in effect, too. Sixty days, ninety days, whatever you can agree to. If, despite your best efforts, you are unable to find a tenant/buyer of assignee, you have the right to bail with no questions asked. If the homeowner squawks and refuses to go along with your safety valves, move on. Remember, we are looking for motivated sellers. We never want to be, (or at least show), we are a motivated buyer. So, yes, higher priced properties make excellent lease purchase opportunities, provided you structure it correctly. Another approach you can take instead of a sandwich lease, Jim, is to simply assign the contract so you needn't worry about being in the middle of this if you are feeling intimidated. Or, you can work with the homeowner on a Cooperative Assignment type of deal, or put on your Consultant's cap and get paid for your specialized knowledge. There are a number of ways to profit in this business. Just look at a property as a problem in need of a solution you can provide.

Chris, when you purchase a property with any kind of financing on it, you will be required to have an insurance policy in place before the deal goes through. Every lender will want their loan to you insured in the event something unforseen occurs. The bottom line is they need to know where their money is coming from should the property go down. You will need to shop around for a policy that covers your needs. If you are talking about a vacant fixer, you need to make this clear to the insurer. A standard homeowner's policy generally will not cover this situation. Your best bet is to shop around locally, rather than online. Establish a business relationship so that in the future you already know who to call and what to expect. You should ask other investors in your area who they recommend. Perhaps some members of a local REIG can assist you. Finally, no, the insurance company will not be angry if you cancel after three months. They are in business to suit your needs, not vice versa. They received three months premiums from you, and the possibility of additional business in the future. They'll love you, Chris.

Gary, your marketing ideas are all sound, and proven effective. Also, critical to your marketing campaign being successful is to diversify it, just as you seem to be doing. Just remember to give it time to work. Too often, a novice will run an ad for one or two weekends, receive a handful of calls that don't pan out, and declare that newspaper ads don't work. Or, they will plant a dozen bandit signs, not receive more than a call or two, and decide they don't work, either. With marketing, it is imperative to give your plan time to work. I believe we can say that a good marketing effort will begin to payoff in two months, and possibly longer. Be persistent!

Hello, Joe, long time no see. Those "other" boards, huh? If your tenant/buyer files bankruptcy it matters not a whit to you or the homeowner. Are they still meeting their rent payments? If so, all proceeds as usual. If not, like any other tenant you would begin eviction proceedings. Bankruptcy laws vary from State to State. In general, though, I do not believe that filing BK will allow a tenant the luxury of living rent free. If I'm wrong, I'm certain someone will come along and tell us. If the seller declares BK, again, I don't see how that affects you or the tenant/buyer. The property can still be sold if and when the option to purchase is exercised.

Good post, Option8. To a lesser degree, I would add a creative thinking Realtor, or two. I have had two good ones I have worked with for years. I refer them much business in the form of homeowners who need a Realtor's assistance. In exchange, I receive CMA's, and the occasional buyer who can't qualify today, but probably can in the next year or two. A perfect tenant/buyer prospect, in other words. On occasion, they have tossed me the name and number of a homeowner who is more motivated than might be noticeable, thus giving me the chance to approach them about a lease purchase. If I am able to put something together, she'll cancel the listing agreement, and I'll pay her a fee for her troubles.

Tony, none of the above work? Are you in one of the six nondisclosue states? If so, that would explain why. But, if not, I don't understand why none of the sites would be helpful. Well, you do have your County records, which will prove helpful. In addition, you can foster a working relationship with a local Realtor. In exchange for him/her providing you with comps, you can refer this Realtor to the many homeowners you will meet who want to use a Realtor and sell in a traditional manner. The relationship benefits both. And, yes, the customer service department of most title companies often provide a package of data for a property when you provide them with an address. In exchange, you give them your business.

I'm happy to offer this free Classified Ads Forum to all the members and friends we have here at The Naked Investor. All I ask in exchange is that before anyone posts in any of the categories, please register first. It's free and it's painless, (I wish I could say the same about the in-laws ). Other than that, I suggest you place your ad in the proper category for maximum exposure and results. Also, if anyone has a suggestion for any additional Classified Advertising categories that they would like to see here, please post it in The Suggestion Box Forum. Thank you, and good luck.

While it won't hurt to have the agreements notarized, it certainly isn't mandatory. The only document you must have notarized to be accepted is any thing that is being recorded. A Memorandum of Option, for example. If you decide to go the notary route you would need to sign it in the presence of the notary. You would not want to sign it first, and then bring the documents to the notary to be signed again. I don't think that would fly, Summer.

Yes, you can certainly call the homeowner if that is your preference. Most standard listing agreements allow the homeowner to cancel if they decide they want to, without penalty. Some may not, and so the seller would need to verify first. The catch is the homeowner would still be responsible if they tried to then turn around and sell the property to a buyer who had previously seen the property while it was listed. In other words, an unscrupulous homeowner cannot work a deal on the side with a buyer who has already seen the property, with the intent of cutting the Realtor out of their commission. This, of course, is not the scenario I described earlier.

I want to kick in my two cents here, because the question of Realtors is a valid one, and it is frequently asked of me. In the past, I have secured numerous deals from sellers who were listed with a Realtor. Usually, it would work something like this: I would drive by a house in a neighborhood I am familiar with, and I know the property is one I could profit from. I do not call the Realtor listed on the lawn sign. Instead, I contact the homeowner directly with my introductory letter mailed direct to their property. If they call me, for starters I know I have a motivated seller who is not too happy with their present predicament. I'll go into my "Lease Purchase Advantage" conversation and explain who I am, and how all this works. More often than not, the homeowner will tell me that they are presently listed with the Realtor. If they don't, I will ask them if they are. Then I advise them that I would be happy to help them out, but to do so requires that they cancel their listing agreement. If they do, we are clear to work a deal. If not, I can follow up in a month or six weeks. In the above scenario, I don't feel I have done anything wrong, immoral, or deceptive. I did not use the Realtor at all. The homeowner made the decision to cancel their agreement. Finally, let me just say I do not dislike Realtors. In fact, I think they provide a necessary service to the community. However, our way of doing business doesn't necessarily require their services.

Hi, Tony. Here is a list I have of some sites that can give you a general idea of property values: www.titleadvantage.com www.rentconnection.com www.iown.com www.domania.com www.netronline.com www.homegain.com www.realtor.com www.homeadvisor.msn.com www.homeseekers.com http://list.realestate.yahoo.com www.dataquick.com www. firstamres.com (www.homeprofile.com) www.realestate.com www.homeradar.com www.homeowners.com Each has its strengths and weaknesses, and some may even be offline. But, it is a good starting point.

Hello, Martha, and welcome to The Naked Investor. We're delighted you decided to join our growing community and hope to see you become an active part of it. You say you hope this board can be a place where you can come with your questions. I assure you that it is. This board is all about sharing, learning, and having fun in the process. So, please do feel at home, and don't hesitate to ask your questions. That's why we're here. I see you're a "neighbor". What part of south Florida? Also, you'll note I moved this thread from the Suggestion Box to this forum. I thought it was a better fit here .

One thing I would like to add after reading Summer's reply. If you need a very good and accurate "electronic appraisal" as you referred to it, I would suggest you visit DataQuick. They are San Diego based, and considered the industry standard for property sales information. If you click on "Consumer Tools" you'll be taken to a page where for $9.95 you can type in an address and receive instantly a fifteen to thirty page printout with anything and everything you wanted to know about a particular property. And, if you find you are using this service frequently you can even become a subscriber and pay a flat monthly fee which reduces the cost per comp significantly.

Summer, I'm a big believer that when you are starting out it is always best to work within your budget and keep expenses to a minimum. Certain expenditures are required, others are not. I don't know that any novice needs an 800 number or answering service when starting. We may not be that busy just yet to justify it. An answering machine would probably suffice in the meantime. When you get busy enough to need an answering service, you'll know it. Then, shop around and you'll find plenty of good information and a good deal or two. My two cents..........

Hello, designtech, and welcome to The Naked Investor. We hope you become an active and contributing member in our community. As for your sign question, well, I haven't done any scientific study so I can't answer with any authority. Personally, many years ago I opted for the professional signs I posted about above. They have always been effective for me, and have proven to be quite cost efficient, too. Signs I purchased seven years ago are still in use today. I imagine if I was using homemade signs I would have replaced them numerous times in that period. Then again, maybe I'm just a lousy sign maker?

That is a common complaint among novices, and I can understand how you feel. We've all been there, believe me. As for how to avoid the frustrations and doubts, I'll suggest a few things that have worked for me. For one, when I find myself becoming irritated and in any kind of negative frame of mind, I'm outta there! When this begins to feel like a job, I pack it in for a while. One of the advantages of this business and of doing your own thing. So, if you find yourself getting negative, stop. Go for a jog. Next, you need to remind yourself that the vast majority of homeowners will be of a more traditional mindset, wanting to sell to a buyer who is obtaining new financing and cashing them out. Accept this as reality and know that you're running about normal. But, these homeowners aren't the ones that matter to us. You will find homeowners who do, in fact, need your expertise and services. That's the guy who is going to make it all worth your while. The guy who gives you control of his property for 36 months with no cash out of your pocket. No one said this is easy, and if they did they were lying. However, the rewards will be well worth it if you stick it out. That first $3,000 or $5,000 buys a lot of bandaids for the wounds you're feeling about now. Stay with it, don't quit on yourself, let us help, pace yourself. I know you'll be successful.

I think it's a reasonable assumption and not a bad approach as long as the process is not too time consuming. Because if it is then it would seem the time you save optomizing those phone calls is offset by the time used getting all the preliminary information.

I've always used the metal "H Frame" style signs to place on the front lawn on every property I am marketing. The frame is a heavy steel, and the sign is sheet metal. Mine simply say: RENT TO OWN (123) 456-7890 I have always found these signs to be a very effective generator of phone calls from prospective tenant/buyers. I have purchased mine from the local FastSigns franchise for $65 each. If you already have the frames and just need the sheet metal insert the cost is around $15. These prices may vary in your location. You can get some info online at www.fastsigns.com.

Steve, first, did you go through the Realtor to see the house and speak with the homeowner? If you did, then that Realtor is entitled to their agreed to commission, paid by the seller. If you haven't had any contact with the Realtor previous to speaking with the homeowner and viewing the property, you can advise the homeowner that he needs to cancel his listing agreement before you can continue with him. Otherwise, he, the seller, will be obligated to pay that fat commission. If he is truly motivated as you say, he should have no problem cancelling the agreement.

Jim, by no means am I the last word on short sales. But, let me tell you what I do know. They can be a source of great bargains and deals if the right property comes along with the right seller. The problem is, you are usually dealing with the bank. As such, they are not interested in wheeling and dealing with creative financing. The general attitude they have is if you want a sweet deal and discount, they're willing to listen as long as you have the cash in hand and can close quickly. They are not about to cut you easy terms, assignability, extended closings, etc. They are looking for cash in hand buyers.

Hi, Joseph. All I can say is "WooHoo!" I'm happy for you that the "White Elephant" has been reduced to a "Cash Cow" . 100 calls?! I'm not surprised. That has, for the most part, always been my experience when I run my Rent to Own ads as I described earlier. Even ugly properties in rough neighborhoods attract much attention with a well worded ad and creative terms. As for these folks exercising their option, politely keep a fire to their feet. In about two months, after they are settled in, remind them that you know a number of good mortgage brokers you have worked with previously. If they need anything you are there for them. You know, be around to let them know you are willing to work with them to help them reach their goal of ownership. Remind them they are soon to be owners and all the benefits that entails. And don be afraid to accelerate the rent credits if they buy early. In other words, if the rent credits would normally total, say, $5,000 after twelve months, and they want to buy after eight months, tell 'em you'll give 'em all the rent credits anyway. If you're looking to get this property out of your name, Joseph, this might speed up the process. Good luck with it. Stay in touch and let us know how it all works out.