MichaelC

Hi, Erik. How goes things? Good to see you around again. Hard money and private lenders are two different animals, at least from my perspective. Hard money is a business where you pay through the nose to get the funding you need. Private money is an individual with capital that can be better served in a real estate investment with you than, say, in a money market fund or a risky stock market position. As for any on the board here, can't say that I know of anyone. But hard money lenders are available quite readily. Do some shopping around. Lending is their business and if you have a low risk deal these guys will at the ready. Private money will require more effort and courting.

No. Let's call it an assignment instead of a sublet. Once assigned you are out of the picture. If the homeowners want you to manage the property for them, from a strictly legal standpoint you can't since you are not a licensed Realtor.

Excellent post, Chris. . .even the cheap shot you got in! Thanks for sharing your experience and insights.

I do not have a specific agreement for rentals. But an easy way to make it legal would be to sign a traditional rental agreement between you and the homeowners, and then sublet it to the tenants you ultimately find. As for managing the property, I don't have a specific agreement for this since I don't do property management. I'm not a licensed Agent and that is a requirement in every state that I am aware of.

Didn't the Obama administration make incandescent bulbs illegal? I'm worried for you, Max. It's only a matter of time before the Lightbulb Police come a-knockin' on your door.

Max, way too long for an ad. Most people have the attention span of a gnat. They'll never get through it. It might work as an article on a blog. It also strikes me as being too personal.

Max, why don't you have your teacher handle the leads from the get-go while you listen in?

I haven't used it myself. But why not give it a try?

Can't say that I keep such specific numbers, but if I were to take what I think is an accurate guess, I think 200 emails gets me about two dozen replies, and in turn that will lead to one deal. Of course, there are variables that will affect this: location I'm working, price range, time of year, sometimes even luck is a factor.

Exactly. The real estate police aren't hiding in our closets.

randian, I haven't cold called a homeowner in a very long time. It isn't time efficient, and it can prove to be discouraging for a new investor, hearing homeowner after homeowner tell you to go away. On the other hand, it's a good way to develop thick skin if you think you need it. I prefer emailing, instead. It's faster, and if the homeowner has no interest, they simply don't reply. No wasted time on the phone, no negative vibes to deal with. And, yes, the administration's latest gambit to allow folks to purchase houses they can't afford to own is all too reminiscent of the recent buying frenzy and crash. I can't imagine they think it's a good idea, but for the votes it will buy them. In fact, when I first read about this nonsense back in December, I mentioned it on The Naked Investor page on Facebook.

Mike, if the homeowner is changing the terms, in this case the lease start date, I would tear up the existing agreement and rewrite it to reflect the current reality. As for the t/b, if she is legit, and it sure sounds like it, find out what she's looking for and see if you can accommodate her with another Rent to Own. Never a dull moment in this business, and there is always an unexpected curve in the road. Beer is great sometimes, too. Sam Adams Cherry Wheat comes to mind. . .

Color me confused. Is there a tenant in the house, or the homeowner? Either way, you don't have much leverage. Real world: how are you going to boot out the homeowner? All you can do is appeal to her sense of fairness and remind her of the agreement you two have, and tell her you have a tenant ready and willing to go. If she willingly vacates, problem solved. If not, it's your call. Do you want to begin the process anew to find another t/b? Do you want to cancel the agreement? Ask for financial compensation for your time and marketing?

The existing tenant wants to stay longer? It's not her call. What does the agreement between you two state? The lease has expired, it seems, and becomes a month to month agreement only if you accept rent. If not, she needs to vacate. Of course, that's on paper. In the real world, if she hasn't paid additional rent and simply needs another two weeks or month with no plans of paying, all you can do is begin eviction proceedings. I'm guessing California is a tenant friendly state, meaning by the time this winds through the courts she will have probably left and you're out the additional expense of the eviction process. This is a sandwich lease, Mike? Then, yes, regardless of what occurs between you and your t/b, you are under contract with the homeowner and obligated to adhere to those terms. Pros and cons with this type of deal. More profit potential, but also additional risk. As for your prospective t/b, unless she is desperate for housing, surely you can take a deposit and put her off for another month or some additional time as needed.

Indeed. Effort equals results.

For simplicity sake, I would do each property individually and have the agreement be specific to the property. For example, the "rough" house on the 2.5 acre lot would be set up as a Cooperative Assignment. You're not a landlord. You put the deal together using your know how and correct agreements, market aggressively, find a t/b, wrap it up and move on. As for the 2BR and the studios, if they just want them to be rented, that's easy enough. For the two vacant lots, that isn't an easy sale. They would probably be better off giving those to an agency with experience in this arena.

Yes, that's a possibility. The idea is to appeal to a t/b who is gambling that long term appreciation, in this case 5 years worth, will make the property a worthwhile deal when it comes time to exercise the purchase option.

Save your money, skip the pot, and piss in a local cornfield.

Oh, yeah. In the rush to get a deal, it's all too common for a n00b to become the motivated buyer, agreeing to anything and everything. Of course, the end result being they are unable to find a t/b, and they now have a pissed off homeowner, and a lot of discouragement. Generally, this is true. But ultimately the market tells us if we're right or wrong. Do you mean the number of tenant/buyer prospects? Impossible to say, As always, getting the deal done is wholly dependent upon the effectiveness of your marketing and the accuracy of valuation. In other words, price it right, get the word out, the tenant/buyers will come a'knockin'. One more thing, Max. Real world expectations: option money will usually be in the 3% range.

The fine line we walk when we do these Cooperative Assignments is trying to satisfy the homeowner with an acceptable net price, while at the same time allowing us enough upside to add on the anticipated option consideration and rent credits. It's easy to get deals all day long if you promise unrealistic and greedy homeowners pie-in-the-sky numbers. The problem then becomes how do you move a property that is now well above market. You don't, and therein lies the common situation with new investors. In their zeal to get that first deal they make promises they can't keep, offering inflated figures to the homeowner so they agree to do the deal, but are then unable to find a t/b because the house is clearly overpriced. What does a brotha do, you ask? Due diligence and then make your offer based on sales data, and not on the homeowner's dream scenario. If you find your numbers and the homeowner's are far apart, blame yourself and ask the homeowner for a look at his. He won't have any because he pulled his numbers out of his. . .well, somewhere else than actual sales data. So now you face a decision: take a deal for the sake of having one, only to face rejection on the t/b side of things. Or, walk and find other sellers better grounded in reality and with at lease a semblance of motivation. In the meantime, the dreamy homeowner can fight the market on his own. . .and he may very well come back to you a few months, and mortgage payments, later.

Hi, Max. Sorry for the delayed reply. I was out of town for a few days of R&R and shut off the machines. I'm assuming your question above is about a Cooperative Assignment. If so, then the option consideration that the tenant/buyer puts up is credited towards the purchase price. So if the homeowner was agreeing to a net price of $208K, then the advertised price to prospective tenant/buyers would need to factor in any option money that is being credited, along with any rent credits you are offering.

A Steve sighting?! Wow! How are ya, bro? So. . .joining the suit-tie-corporate world, are you? Can I get free MLS access now that you're an insider?? Best wishes, old buddy!

Without question, we do NOT need to be licensed to do lease options, or to invest in real estate in any manner. Whoever told you this couldn't be more wrong.

Hi, Tom. Dodd-Frank has zero affect on lease purchasing, despite what you may be reading elsewhere on the internet.

Difficult, yes, but not impossible. Aggressive marketing, some happy FSBOs, and it goes viral. Voila! The Facebook of the real estate world. . .well, that might be an exaggeration.