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Everything posted by MichaelC

  1. Mike, I would take the easy route and use an addendum to spell out the new terms.
  2. One of the advantages of being in the middle of the deal is not needing to obtain funding. If you are using an investor friendly attorney or title company they should know how to handle the deal. If not, find another company.
  3. Hi, Rick. I never assign a lease back to the seller. What's the reason or advantage for doing this, instead of assigning the deal to the tenant/buyer? As for what I tell the t/b if/when they ask if I'm the owner, honesty is your best policy: "No, I'm not the owner. I own a property management company that specializes in Rent to Own" Or something similar.
  4. Here in Florida condos and townhomes are a very big market. To exclude them would be a big mistake. Of course, other areas and local markets may be different. But I think you'd be making a mistake to overlook this segment. Not everyone is a SFR buyer, and as long as the terms are in line with market conditions, there will be interest in condos and townhomes. Just be sure to check the association's regulations regarding rentals. Some allow them, others don't and still others will allow only a percentage of the units to be rentals.
  5. MichaelC


    You asked that same question in your first post. If you want to learn about lease options then, yes, I think if will be a good fit for you and an excellent value overall, considering you are also getting all the contracts and agreements you'll need.
  6. MichaelC


    Every investor needs more than one strategy to be successful. Some deals will lend themselves to wholesaling. Others are excellent for buy and hold, or fix and flip. Others still are prime opportunities to utilize one of several types of lease option strategies. My manual is, in my opinion at least, an excellent starting point for understanding and putting into play the lease option strategies. Could you make a deal from using the manual? Absolutely. Will you? I have no idea. If you put the manual on your shelf after reading it and don't pursue deals via marketing, then you have probably wasted your money.
  7. MichaelC

    MLS Book

    You had a tough childhood, Chris. Surprised you turned out OK.
  8. MichaelC

    MLS Book

    Wow, a dial phone! Wish I had one now. Probably worth a few dollars at a garage sale. ​
  9. Hi Manny, Phone skills are often the most difficult part of this business for the new investor. What to say, what not to say, etc. The seller on the other end can pick up on your nervousness and insecurities and they you're asked the dreaded, "how long have you been doing this?" Gulp. My training program is centered around my doing three way calls with the student on mute on one end of the phone, listening in while I speak with the homeowner. It's a very effective, hands on learning strategy. If you're interested in us working together I will gladly reduce the cost considerably since you seem to have already​​ rolled up your sleeves and gotten to work. Feel free to PM me if you want to talk, Manny.
  10. No. You don't want to price the property out of the market. So it's a $148K gross purchase price to the t/b, from which you receive $5K.
  11. Does the t/b pay all closing costs? Probably not all, because certain closing costs must be paid by the seller, depending upon local and state laws and the type of mortgage the buyer is using. So my contract will state that the purchaser will pay all allowable closing costs, which is usually the majority. Your numbers make the case that a lease option can be more profitable for the homeowner if they are willing to wait to cash out. Also, and you know this deal best, it might be possible to nudge up the option price a bit to the top of the market range. Remember, there is value in time and if you are offering a year or more, most tenant/buyers will be willing to pay that slight premium. So for example, instead of $143K it might be possible to go with $148K. Again, I'll defer to you on this. But just a thought.
  12. I usually answer questions on Dodd-Frank and lease options as follows: It is too soon to tell because the law is so new and there have been no federal precedents applied as of yet. In my humble opinion, Dodd-Frank is law that apples to the sale and finance of properties. A lease option is NOT A SALE or a transfer of title but a contract for the opportunity to purchase for a pre-negotiated time frame and terms. It is not an obligation to purchase as is a sales agreement. Rent credit only applies if the option is exercised, so therefore it is a pre-purchase discount to the contracted purchase price and not part of the final sales finance, etc. Of course, the agreements we use must be designed to reflect this. There is a wealth of misinformation out there right now from guru's with no legal background and who have NOT read the law or are misinterpreting it. I would not worry about Dodd-Frank and I also would take a wait and see approach on forthcoming federal decisions.
  13. Every deal is different, of course. But typically the t/b pays the option consideration plus the first month's rent prior to taking possession. I use those terms interchangeably. I know the legal gurus among us will make a distinction between lease option and lease purchase. But in the real world, a lease purchase does not guarantee a purchase. I understand the homeowner can file a suit if the t/b doesn't follow through and buy the property with said lease purchase. But, then what? The guy lost his job or got a divorce. How are you going to force him to buy a house he can't even get a mortgage on? It's all semantics. Yes, I always include a generous rent credit, usually in the 50% range. Tenant/buyers respond to an ad with that headline, believe me. Build it into the price as best you can. Of course, there are times when the numbers don't allow such generosity. But always offer the fattest rent credit you can . Your objective is to find a t/b and move the property ASAP.
  14. Hi, Shelly. Just so I'm sure, you aren't looking at this as an Agent but as an investor, correct? In my opinion the numbers are a bit thin to do a sandwich lease. Almost zero monthly cash flow and minimal equity. That, combined with this being your first deal suggests you should approach this as a cooperative assignment. With a $143K appraisal do you think you could make the argument to prospective tenant/buyers for a $149K option price on a 12 month deal? If need be, go with 24 months. Most tenant/buyers are always looking for the luxury and value of more time in exchange for paying a slightly above market price. The market rent of $1,100 will cover the homeowner's PITI, so that should keep her pleased. Your piece of this deal will come in the form of the option money you collect and keep. Figure about 3%, or between $4K-$5K. Try and keep it all but the reality is the homeowner will want some. Now, your negotiating skills come into play. If she asks for a piece, and only if she asks, offer her an amount equal to one half of one month's rent, emphasizing it is a nonrefundable payment, not to be confused with a refundable damage deposit. It might fly. From there, you may need to go higher but do so grudgingly. Remember, it's your money for having the know how and the paperwork to put the deal together.
  15. Mike, I will defer to Steve, but here's my two cents since you asked. . . I have always assigned both the lease and the option agreements, and have never had an issue doing business this way. That said, if you were to go with a new lease for the t/b and assign only the option, I don't see any downside to that approach. PS: the Tarheel State needs new elected officials.
  16. The media will destroy him, BIGHOP. Right now he isn't being taken seriously by the press. But should he do well in the debates and his poll numbers get serious, we can expect the usual BS to be put out. Headlines about his personal life, stories from disgruntled employees, etc. Anything that can be put in the headlines to make the low information crowd take note. Hillary, on the other hand, will need to have a smoking gun in her hand and a warm body at her feet before the press will even begin to question her.
  17. Heh. Hillary has already said she plans on raising taxes and Wall Street/Corporate America are the problem.
  18. As a licensed Agent you are, unfortunately, under the jurisdiction of the RE Commission. So yeah, some restrictions are to be expected. But I have always argued that a lease purchase doesn't truly exist. I mean, how can you force someone to follow through and buy your house, regardless of what we signed a year earlier? I lost my income, I got a divorce, I was hospitalized, etc. Life situations change. What recourse does a homeowner have? Sure, you can sue for breach, but that isn't going to enable me to obtain financing and purchase a house I can no longer afford. In the meantime, the seller has thousands in legal bills and an unenforceable judgment. The whole exercise is silly, Steve, but necessary in the eyes of the powers-that-be on the commission. Good luck with it all. I know you'll work through this BS and come out on the other side smelling like a rose. . .or one of those famous TarHeel barbecues I hear so much about.
  19. Hello, alterman, and welcome to The Naked Investor. 1) What a tenant or tenant/buyer can be held responsible for is wholly dependent upon the state's landlord/tenant laws. Despite what your contract may say, state law will always supercede that. You can tweak the agreement to read something like: Tenant/Buyers shall be responsible for all permissible maintenance and repairs as per the state of ________ . 2) No. Your tenants cannot be required to pay taxes or insurance. They pay rent. The homeowner is responsible for paying his/her mortgage, property taxes, and homeowners insurance. 3) Who told you this and have they referred you to the specific citation that states this?
  20. MichaelC

    MLS Book

    Hehe. Strolling down Memory Lane, Steve? I recall waiting for the Sunday morning papers to arrive so I could jump on the real estate section and start dialing for dollars. By 10:00 AM I already had 3 homeowners tell me to get lost. Good times, indeed.
  21. Perfect legalese. Written so that it can be interpreted in a variety of ways, thus assuring lawyers thousands in fees for generations to come.
  22. Be the bearer of bad news and tell the homeowner your initial analysis doesn't support his numbers. Then, taking a humble approach, tell him you're sure the problem is you, and ask if he can share his market data with you: recent sales, rentals, etc. Chances are he doesn't have any and his numbers were pulled out of the air. But this puts the burden of proof on him and, hopefully, gets the homeowner to reassess his numbers. Then, maybe, you have a workable deal.
  23. If you receive more option money than anticipated you have several options, none of which are a negative: 1) You can give the additional money to the homeowner, explaining that the t/b surprised you with this and he, (the homeowner), receives some nonrefundable cash upfront. Of course, this option money, like all option money, is credited in full towards the purchase price. 2) You can pocket the extra cash. However, this lowers the homeowner's net price and so you'll have some explaining to do. Something like, "They love the house, Joe, but their offer will mean about $2,500 less to you than we had discussed. If he accepts, you've earned an extra $2,500. If he rejects it, tell him you'll see what you can do. Get back to him in half an hour with the good news: the t/b has agreed to the homeowner's price and is also paying some additional cash upfront, (see 1 above).
  24. Hi, Mike. . . 1) If I were in the deal long term, say as in a sandwich lease, I certainly would. But when doing a CA I am a bit more casual regarding this. I may just ask the homeowner if they are current and take them at their word. But if I have even a slight doubt I will require verification. It's a judgement call. 2) It's irrelevant what the homeowner's want. Instead, it's always a question of what will the market bear. In your example above, let's assume that the property is in the price range of $250K - $260K. Then the numbers as you described will work. . .almost. What I mean is if the homeowners will net $250K, you would add to that whatever amount of option consideration you are keeping and whatever rent credits, if any, you are offering. So if you were keeping $7,500 option consideration and the rent credits totaled, say, $6,000, then the gross price to the t/b would be $263,500. The question you need to ask is whether or not that figure will be accepted by the market. If so, you've got a workable deal. If not, the homeowners need to have their expectations lowered a bit. That $263,500 price, by the way, is shown on the Option to Purchase Agreement, Paragraph 1C.
  25. Yes, with the correct paperwork placing you in the deal as a principal, you are good to go and can assign your deal. Steve is correct: NC is on a fishing expedition.
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