Rent Credit?

[Kimberly 0]

Jowaju,

 

Have you checked the comps -- compared to simliar houses that have recently sold -- on the property? You've got to do that before you know if the homeowner's asking price is high, low, or near market value.

 

Based on the numbers above, I'd suggest a Cooperative Assignment and not a sandwich deal. Your Assignment Fee would be all or part of the tenant/buyer's Option Consideration.

[jowaju 0]

This is all speculation at this point, just trying to get a feel for the game around me. We looked at a house in the same neighborhood for rent about 2 weeks ago, it was renting for $900 and didn't look nearly as nice as this house. As far as comparable sales go, I live in a non-disclosure state (AR), so I'm not really sure how to go about finding comps.

 

Also, can I ask why you would do a CA on this one, wouldn't that mean you would lose out on $100 cashflow a month and a final payday of over $4000?

[MichaelC 160]

Hello jowaju, and welcome aboard.

I apologize for my newbie questions, I just started reading about CREI on Sunday afternoon, my head is still reeling with information overload.

No need to apologize. But be careful with that information overload. It's a common problem among n00bs in this business. Also referred to as Paralysis of Analysis. Knowledge is a good thing, but not if your so busy analyzing a potential deal that another investor comes along and takes it out from under you.

Get some basics organized in your head, start speaking with homeowners, get cuffed around a bit, (everyone here has gone through that scary time ), then come back here when something materializes and we'll get you through the process.

Now, as for your questions about rent credits...

That hypothetical deal you describe is fairly typical for a sandwich lease. $3K upfront profit, $100 a month cash flow, and another $4K on the back end if/when the t/b exercises their option. Not a deal that will put you on easy street, but still a good one. Do the deal, put it on autopilot, and then move on to the next.

Having said that, I also must say you can probably improve that bottom line. For example, the homeowners have reduced their price twice and are now asking $106K. Why would you offer that amount? Why not offer, say, $97K with you paying all closing costs? It might fly, but you won't know if you don't make the offer. They will probably counter offer, and you can always raise your offer. And if you got the deal at, say, $101K, you just increased your bottom line by $5K.

And another thing to keep in mind is that, in my experience, 75% of t/b's end up walking away from the deal. You may very well find yourself doubling or tripling your profits as you repeat the process a second or a third time.

[jowaju 0]

I can understand the paralysis, there's just so much to wade through. I am however, actively trying to combat it. In fact the only reason why I haven't already set this deal up is I am lacking the paperwork to complete the deal. I understand your manual comes with all the forms I will need, but at the moment there's just no way to squeeze out $100 to do this. We recently had our first child and my wife is now staying home to take care of our daughter. She will be returning to work in September, at which time our cashflow will begin to be positive again and I can purchase your guide and be on my way to freedom. I just can't jump headlong into this without having everything I need to at least show the seller that I know something about what I'm doing. Mark my words though, you haven't heard the last of me

 

 

Thanks for the replies, that's why I was questioning the CA on this deal, as the profits could turn out quite nicely indeed if the first t/b walks after their year is up. I'm not opposed to doing a CA, but it seems like the best time to use that option is when other, more lucrative ways don't pan out.

[MichaelC 160]

I can understand the paralysis, there's just so much to wade through. I am however, actively trying to combat it. In fact the only reason why I haven't already set this deal up is I am lacking the paperwork to complete the deal. I understand your manual comes with all the forms I will need, but at the moment there's just no way to squeeze out $100 to do this. We recently had our first child and my wife is now staying home to take care of our daughter. She will be returning to work in September, at which time our cashflow will begin to be positive again and I can purchase your guide and be on my way to freedom.  I just can't jump headlong into this without having everything I need to at least show the seller that I know something about what I'm doing. Mark my words though, you haven't heard the last of me

<{POST_SNAPBACK}>

Tell you what, jowaju. My hangover isn't so bad this morning, Mrs. C. is out of town, and the kids are still sleeping. So I'm feeling pretty chipper. PM me your name and address and I'll get you out a complimentary copy of my manual, including all the contracts you'll need for this deal and any others you might be working on. Between that, and the collection of grey matter on this board, you'll have no excuses for not sending that new rugrat to an Ivy League school in a few years.