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Everything posted by MichaelC

  1. My wife and I hit up Italy last October to check out some ancestral stomping grounds. This recent visit was to Spain and Portugal. Wine, Iberico ham, and bread. Couldn't get enough!
  2. Hi, Manny. Sorry for the delayed reply. Just returned from a week's vacation in Europe, away from machines and the internet. Will the seller bark at seeing you are making money? In all likelihood, he probably will. But did you tell him you were a nonprofit organization? A church? Our job is to have the homeowner's attention focused on his net price and profits, not ours. If that number was agreeable upfront, and your piece of the pie doesn't affect that, the homeowner has no reason to gripe. But in the real world that doesn't mean he or she won't bitch. When this happens you have to be nimble and flexible and do what is necessary to keep everyone happy and the deal alive. Real estate involves much in the way of negotiation.
  3. Hello, Mike Pine! Good to hear from you again. I see you are undertaking a new venture with Create Your Buzz. I wish you all the best!
  4. In addition to what Steve wrote, if the t/b doesn't exercise their option and you decide not to exercise yours, you advise the homeowner of your plans as far in advance as you can so he can make his plans. As for the t/b, their agreement with you specifies that they are required to give you written notice of their intent to exercise or not no less than 60 days prior to the option expiration.
  5. Mike, it sounds like a keeper from your description. Do you have a mortgage broker you can sit down with to assess the deal and how best to finance it. That's where I suggest you start. They all have an in-house counsel who should be able to answer your questions about asset protection.
  6. Mike, the numbers tell the story. What's today's FMV and what's the option price agreed to years back? There should be some equity there. What's the rental income? Will it cash flow enough to make it worth your while as a long term buy and hold?
  7. Baron, your marketing is dependent upon two factors: your budget and your time. Emails like the one you described are fast and free and I recommend you use them. What you wrote above is a good starting point. On the other end of the spectrum would be mailings. More time consuming, certainly more expensive, but also a more targeted market. Emails are more a shotgun approach, a numbers game.
  8. No doubt lawyers can be deal killers. Especially if they aren't familiar with a lease purchase, what we do and how we do it. And don't be surprised by how many attorneys are not up to speed on this stuff. The result? They play if safe and tell their client this is a dangerous deal and steer the homeowner away. Unfortunately there isn't much you can do about this. If you refuse to send the paperwork for review the homeowner will assume you are up to no good and the deal dies. The approach I take is to first suggest to the homeowner that you meet and go over the paperwork together, stressing that it is very pro-homeowner and that he might not need to pay his attorney for something as clear and easy to understand as a lease option. If he insists, offer to meet with his attorney to review the agreements. Sending them to the attorney would be your next best option. But you want to remain in control of the deal, Manny, and anytime you hand over your agreements without being present you've lost that control. There are exceptions to this, of course, and it's a judgment call you'll have to make sometimes as to whether or not a homeowner is trustworthy, or just looking for the necessary agreements to do the deal himself.
  9. Shelly, I agree. We're not in the business of knowingly placing a t/b in a property who doesn't have a chance of getting financed. So a knowledgeable and helpful mortgage broker is an important piece of the puzzle. I do not typically collect a security deposit in addition to the option money. It can become an obstacle for many prospective tenant/buyers to come up with first month's rent, option money, security deposit, and some homeowners even insist on last month's rent, too. Each deal is different, of course, but I typically go with first month's rent and option money.
  10. I think a mortgage broker can better answer your questions. And I don't think the FICO in and of itself is the only factor, which is why it is hard to say with certainty that a score of, say, 580 will definitely get financing or be the reason for being turned down.
  11. A credit score, in and of itself, shouldn't be the sole factor in determining an applicant's credit worthiness. Many other factors will be considered by a lender. That said, you can require an applicant to sit down with a mortgage broker to have their situation reviewed so all parties can know the likelihood of the option being exercised and the deal closing.
  12. I don't often do 36 month deals. Most homeowners are not up for that. They want their house sold and they want their cash. 12 months is reasonable. But 36? Not so much. Regardless, I set the price at the top or a little above the top of the current value. It is impossible to predict prices 2 or 3 years down the road. So many things can happen that can affect prices in either direction. I want the t/b to exercise their option and when they do, to be able to obtain financing. If the appraisal comes in well below the agreed to price the t/b is in a bad position. Everyone is aware, or should be aware, of the risks involved, such as prices rising or falling. But when a homeowner tries to make their argument that prices will rise 10% this year, next year, and again the following year, I'll ask if they can guarantee this in writing for the t/b. They won't, they can't, and the deal dies. So unless there is a particular reason why you are doing a 36 months deal, I suggest you stick to 12 months. Homeowners always ask how much you can get them for their house. I do a market analysis and present them with the specific numbers: length of lease, monthly rent, and net selling price at closing. I don't mention rent credits because it is one more number for them to wrap their head around and that is often problematic. Besides, their focus needs to be on that net figure. The rent credits and my/your share of the option money is added to the net price, not deducted from it.
  13. There are a few ways to approach this, but I agree that with the details you described it is best approached as a Cooperative Assignment. The easiest way to figure the numbers is to start with a true net selling price to the homeowner and build from there. Let me give you an example. . . After checking recent sales data you determine that the seller can realistically expect $150K at closing, assuming the t/b exercises their option. But to this $150K net price, you need to add any rent credits that you are offering, along with whatever option money you are pocketing. For the sake of clarity let's say the rent credits totaled $5K, and you the t/b was putting up $5K option money, all going to you. That $10K needs to be added to the option price that is written into the option agreement and that you would be advertising. So in this example, the advertised price is $160K. Questions?
  14. Glenn, getting a purchase agreement is eventually a necessity. So when the t/b decides they want to exercise their option to purchase they can go an attorney or title company with their existing lease option agreement and have a purchase agreement drawn up off of that. Then they go to visit their mortgage guy and begin the financing process. These deals are options for the buyer, not for the seller. If the latter decides to back out of the deal, the buyer has an easy lawsuit that most any attorney would love to take. Trust me, you'll be bitten by an alligator before this happens.
  15. Better hope your wife doesn't read that post. Most of the HOA's are more bark than bite anyway. They generally require an application fee from the t/b prospect, sometimes a face to face interview, and then they lord over the application for a few weeks and render their decision. Egotistical, power hungry loons, mostly.
  16. Hi, Glenn. First, no need to reorder my manual. PM me your full name and I'll be happy to send you a PDF of The Naked Investor, along with the agreements. Not a week passes that I don't receive an email with a note similar to your post. The investor or yet-to-be investor is struggling with paralysis of analysis. We all want to know everything before we do anything. Of course, that's impossible but a wonderful excuse for allowing your fears to keep you in your comfort zone. Mind you, I say this from personal experience, as well. Looking back, I probably wasted three years wanting to know it all before taking action. Haha. . .yes, indeed. The south Florida HOA's. Pain in the ass is putting it mildly. I try to avoid them when I can but it isn't always possible. When necessary, we need to follow their rules, as petty and unnecessary as they often are. If the deal is worth the aggravation, put up with their crap, Glenn, and get it done.
  17. Shelly, what type of file are you trying to upload? I should be able to help you with that.
  18. I don't use a Letter of Intent, specifically. When doing a Cooperative Assignment, my first document to the homeowner is my Short Offer Letter, which only highlights the terms, such as length of lease, rent, and purchase price. No mention of option money is made. In fact, I never bring up option money until the homeowner does. . .and they will. When the terms are agreed upon, I then have the lease and option agreements prepared and signed. When I find the t/b then I complete the paperwork with the Assignment Agreement. It's on this last document that option money is mentioned, stating that the full amount will be credited towards the purchase price.
  19. Shelly, I like the approach you describe and can't help but think that it will click for you sooner rather than later. Don't know what kind of numbers you are talking about when you say you have done "some marketing", but be advised that numbers are the key. I hate the expression, "it's a numbers game", but to some extent that applies here. The more homeowners you contact the more likely you receive some "tell me more" replies. So stick with your plan, (it's a good one!), increase the numbers you are doing, and I have to think your results will eventually reflect your efforts. By the way, I'm assuming you are mailing to these homeowners? What is your piece saying?
  20. My understanding is that the money being paid by the tenant/buyer will be divided between assignment fee and option consideration, as has been agreed to between the parties. For example, $5K is being paid by t/b, with the understanding that $3K is assignment fee disbursed to the assignor, and the balance of $2K being a credit towards the purchase of the property. Of course, I'm not an attorney and that isn't my contract, so I could be wrong. Who's paperwork is that, Dino?
  21. Tenant/buyers can be strange birds, indeed. Option consideration and three months rent before they realized they couldn't afford the place? I'd take the money and leave them alone. They've lost enough already and to go after them legally would be time consuming and expensive and result, at best, in a default judgement against them but you'll never collect a dime. You should start by contacting the homeowner and explain your situation. Is he/she reasonable? They may be willing to work with you on the rent. If not, you can always refer them to the agreement they signed that allows you to cancel with written notice and payment of one month's rent. They should realize they have more to lose by not working with you. Let's hope cooler heads prevail.
  22. You never left the game, bro. Just changed uniforms. Congratulations, Steve!
  23. A CPA would be a good starting point, one who is experienced with the real estate biz. Get a reference or two from other investors, maybe from a local REIC.
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