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<Steve>

1st Ad, 1st Call, 1st Offer

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Hey Everyone-

 

My ad in the paper just came out Sunday and have already made an sandwich L/O offer. The seller has just moved to the sunshine state of Florida (MC land <_< ), and will be moving the rest of his family in a couple of weeks. He called me stating, that he is flexible and can work with a lease option.

 

Here is the skinny of the deal, but hopefully not to skinny:

 

Original Price/List Price $259,900. (about or slightly above current market value)

MLS- seller purchased the property 2 years ago for $229,900.

 

My L/O price 240,000.

Monthly Rent $1,300 (market rent $1,300 to $1,500)

3 year term

60 day t/b marketing

 

T/B

Sale price $260,000

Rent $1,400 to $1,500

50% monthly rent credit for 1 year = $750 mnth totaling $9K

 

Upfront profit: 2% to 4% of sale price =5K+

Monthly cash flow: $100 to $200

Back end: 6K

 

Mentioned to the seller about doing a CA and says he may be more interested going that way. Spoke with the seller again and have faxed a Short Offer and FAQs to him. Will see if anything comes about with this. At the very least a seed is planted.

 

<Steve>

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Ed-

 

I basically used the ad suggested from the manual.

 

"Family Needs Lease with Purchase Option in Good Area. phone#XXXXXXX"

 

Have received another call on this ad again today.

 

Thx <S>

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My ad in the paper just came out Sunday and have already made an sandwich L/O offer.
Way to go, Steve. No moss growing on your backside :D . To state the obvious: we can't get offers accepted if we aren't making any. You'd be surprised how that concept is lost on many newcomers to our business.
The seller has just moved to the sunshine state of Florida (MC land  ), and will be moving the rest of his family in a couple of weeks.
Please! Will someone get the word out that this state is already way too crowded......on the other hand, supply and demand..........I'm raising the rent and asking price on all my properties now!

Steve, my personal take on this deal is that it might be a bit on the thin side for a sandwich lease. I emphasize might, because I obviously don't know your local market as you do. Is there a demand for this property in the area it's located? Can you fill it fairly quickly? How much time before the lease with the seller begins? Your cancellation clause is in place? Is it realistic to expect $5K option money in this price range?

Not trying to rain on your parade. Just looking at the deal from a conservative, cautious viewpoint.

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Thanks MC-

 

Will someone get the word out that this state is already way too crowded......on the other hand, supply and demand

:lol: May be I can send the seller your way as a t/b and we can make this deal a double sandwich L/O. Kinda like a Big Mac deal. :D;)

 

Well anyway, yes I am working to make the month of June the start to my "Marketing Mayhem" and should be getting a new batch of business cards geared towards seller's as well. My plan is to leave a trail of these things every where I go. I figure it's a numbers game and the more offers made the better chance of making a L/O deal.

 

my personal take on this deal is that it might be a bit on the thin side for a sandwich lease

Where this house is located it is a typical home in size and price. However, it is at a higher price than what I accustomed to acquiring as an investment property. This may work better as a CA and the seller seemed to favor it over a sandwich anyway. I think for me the rent amount is somewhat tight. And in this area there are not alot of rental properties, so it's difficult to nail down exactly what a rent should or could be.

 

That said, I did tell seller it may take 30 to 60 days to to find a qualified t/b and that is when the L/O would begin. In-addition, yes the L/O contract has a "Cancellation Clause in place." I think knowing this and agreeing to this with the seller is what gives me a little more confidence to make an offer. I only wish I had a contract like this a couple years ago.

 

Thanks Michael

 

<Steve>

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So then, Steve, was your offer as a sandwich lease, or to work with the seller on a CA? I'm confused. It is early in the AM.

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Yes, my offer is for a sandwich lease. However, If the seller is not wanting to go this way it seemed he might be more willing to go with a CA. I am going to try and contact the seller again today.

 

<S>

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OK-

 

Talk with the seller and he wants to do the sandwich Lease Option! :D

 

We talked again about marketing for a t/b for 60 days before the lease begins. The seller asked, what happens if I can not find a t/b. My response was we can adjust the numbers like the rent amount and market for another 30 days. Or, worse case give it to a realtor. He was fine with that. ;)

 

The seller is in Florida, I ask when he would be coming back this way so I could see the inside of the property and we could sign the paper work. He mentioned he was not coming back and gave me directions on how I could get into the house to take a look. I guess it's a good time now to go look at the property. :D

 

Well, he wants me to fax the contracts for him to look at. I would rather meet face to face but I guess we can do this long distance. The seller mentioned we could mail originals.

 

Now, originally the seller wanted to sell his house here and buy a house in Florida. A traditional sale. But, because he is doing this L/O with me, the seller has been checking the last couple of days about pulling his equity out with an equity line or loan. I'm sure he wants to get his original down payment back when he first bought the house. He doesn't want to sit on his equity for 36 months. I can't see a problem with this unless he borrows more than what I am buying the house for. Any thoughts on this one?

 

Lastly, although I have done a couple L/O in the past, this is my first sandwich. And certainly this is the highest price home I have worked with. But in this area of the county, this type of house is typical. I do feel comfortable for the most part that if I am over my head and can not get what I need from a t/b, I can get out of the contract with this 60 day t/b marketing time, and a cancellation clause in the contract.

 

Any responses would be greatly appreciated, as I move forward with this.

 

Thanks <Steve> :lol:

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Steve,

 

I would wait until the HO refinances before signing any contracts. If the original financing interest rate was greater than the refi then you could be looking at a greater monthly pos cash flow but if it's not then you could be looking at asking for a higher rent to cover the new rate. You also dont want the HO to be using the home as colateral after you lease the property.

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Talk with the seller and he wants to do the sandwich Lease Option!
OK. He wants to be "hands off". No problem.
We talked again about marketing for a t/b for 60 days before the lease begins. The seller asked, what happens if I can not find a t/b. My response was we can adjust the numbers like the rent amount and market for another 30 days. Or, worse case give it to a realtor. He was fine with that.  ;)
Excellent! You're a smooth operator, Stevie :lol: .
The seller is in Florida, I ask when he would be coming back this way so I could see the inside of the property and we could sign the paper work. He mentioned he was not coming back and gave me directions on how I could get into the house to take a look. I guess it's a good time now to go look at the property.  :D
HAHA! Sounds crazy to a lot of folks, but that's the efficient way to run your business. There is no need to see a property if the homeowner isn't willing to agree to your terms in the first place.
Well, he wants me to fax the contracts for him to look at. I would rather meet face to face but I guess we can do this long distance. The seller mentioned we could mail originals.
Agreed. But, there doesn't seem to be any chance of a face to face with this guy. If you are planning on faxing the agreements to him, don't fax a signed copy yet. Just fill in the terms and, if he asks, explain that the hard copy you are sending him will be signed and ready to go. None of this should be an issue with the seller.
Now, originally the seller wanted to sell his house here and buy a house in Florida. A traditional sale. But, because he is doing this L/O with me, the seller has been checking the last couple of days about pulling his equity out with an equity line or loan. I'm sure he wants to get his original down payment back when he first bought the house. He doesn't want to sit on his equity for 36 months. I can't see a problem with this unless he borrows more than what I am buying the house for. Any thoughts on this one?
This is a bit sticky. You need to discuss the specifics of this refi wth the seller, and be sure he isn't going to do anything that will affect the agreed to terms with you, or the marketability of the title.

Waiting, as Jake suggests, is a possiblity, but then you run the risk of losing the deal. I mean, if the papers ain't signed the deal ain't done. I would rather lock up the property and protect my position in it. For sure you need to have a Memo of Option recorded immediately. You may also want to consider a Performance Mortgage. And, of course, your signed and dated Lease with Option to Purchase Agreement has a clause about the marketability of title and any liens on the property.

Lastly, although I have done a couple L/O in the past, this is my first sandwich. And certainly this is the highest price home I have worked with. But in this area of the county, this type of house is typical. I do feel comfortable for the most part that if I am over my head and can not get what I need from a t/b, I can get out of the contract with this 60 day t/b marketing time, and a cancellation clause in the contract.
Indeed, Steve. Your risk and exposure are minimal with the seller. You have a number of safety nets in place, including ample marketing time for a t/b, and a right to cancel clause. Your risk is pretty much limited to any marketing time and expense.

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Great! Thanks for your replies Michael and Jake.

 

If you are planning on faxing the agreements to him, don't fax a signed copy yet.

I did fax the contract to the sellers for his review and did not sign it. Also, I left the term dates blank for now as we are moving towards the middle of this month. I maybe able to start the lease September 1st and gain a couple extra weeks from this month for t/b marketing time. :D

 

You also dont want the HO to be using the home as colateral after you lease the property.
For sure you need to have a Memo of Option recorded immediately. You may also want to consider a Performance Mortgage. And, of course, your signed and dated Lease with Option to Purchase Agreement has a clause about the marketability of title and any liens on the property.

Thank goodness for the Naked Investor Contracts!

 

OK, I will most definitely record a Memorandum of Option with the county for my protection. Do you know which office in the court house I need to go to? :lol:

 

Looking a head a little, do you think I need to use an escrow company for the monthly payments? And if so, when looking for an escrow company how are they listed? I checked the good 'old yellow pages and there are no companies listed. ( ;) ok, I'm aloud to have a couple stupid questions :D )

 

I mean, if the papers ain't signed the deal ain't done.

That's for sure. It's not time to break open the "Jose Quervo" yet. :P The seller is looking over the contract today, and I will be touching base with him this weekend.

 

Thanks

<Steve>

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I will most definitely record a Memorandum of Option with the county for my protection. Do you know which office in the court house I need to go to?
Each county handles it in a slightly different way, Steve. It is usually either the Recorders Office, or the County Clerks Office. Your best bet is to call the County's main phone number and ask.
Looking a head a little, do you think I need to use an escrow company for the monthly payments? And if so, when looking for an escrow company how are they listed? I checked the good 'old yellow pages and there are no companies listed.
Absolutely! Or, arrange to make the payments direct to the lender yourself. However, many homeowners will have a problem with this, much as you should have a problem with the homeowner being trusted to make all payments in a timely fashion. Call a few local title companies and tell them what you are wanting to do. They'll be able to set you up, or direct you to someone that can. The costs are nominal. Usually along the lines of a $25 set up fee, and a $15/mo service fee. Cheap insurance, in my opinion.
It's not time to break open the "Jose Quervo" yet.
Heh! Rookie mistake! You'll never hear me saying that! <_<

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Don't bother with the Cuervo and go straight for the Petrone.

 

Mike

:ph34r:

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Don't bother with the Cuervo and go straight for the Petrone.

 

Mike

:ph34r:

OK....clue in the old timer..........what the heck is Petrone? <_< Sounds like a fuel additive.

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Still rolling with this one. I spoke again with the seller in Florida and looked at his property. Sweet house! Most definitely white collar and will sell itself.

 

After faxing the contract, and the seller's review, he is OK with everything. The rent I was trying to get was 1,300 he wants 1,400. Still will work. Smaller monthly, but after seeing the property, I think this deal will be more front end.

 

Last hick-up:

The seller has been checking the last couple of days about pulling his equity out with an equity line or loan. I'm sure he wants to get his original down payment back when he first bought the house. He doesn't want to sit on his equity for 36 months. I can't see a problem with this unless he borrows more than what I am buying the house for. Any thoughts on this one?
You need to discuss the specifics of this refi wth the seller, and be sure he isn't going to do anything that will affect the agreed to terms with you, or the marketability of the title.

Well he is still working on getting his equity line, and it appears he maybe able to qualify to borrow a little more than what I am going L/O the house for. I mentioned that this could be a problem when the tenant buyer is ready to purchase. The seller stated that he just wants access to the equity and if he should go over my l/o price, he would come out of pocket for the difference should the t/b close. That is fine I suppose; however, I will need to check the "Liens" paragraph in the contract and see if I am covered. If not, I will need to add some verbiage regarding this issue.

 

Before the seller signs the L/O agreement, he wants to make sure his equity loan is rolling. Seems he needs his house to qualify as his primary residence, and he feels that if it's leased, it will be looked at as an investment property. He did mention that if I a ran across a t/b in the mean time, he would go ahead and sign the paper work. We talk every 2 to 3 days. I thought I would give him a little time, but may need to give'em a little push.

 

 

<Steve>

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