I took Action!

[GetErDun 0]

I finally did it. I finally took action. First, let me note that I started "looking into" investing in October or last frigging year! I was going to do rehabs but then found the LO world and decided it fit me/my life/the current market better. So, feeling disgusted that It had been almost a year, I set a deadline for myself to "do something" by the end of October or I would be forced to consider myself a loser. With the pressure on, I made 2 cold calls today from a 2 week old newspaper (you'll see why it was only 2 later) It might not seem like a big deal, but it is to me because it is the start and there is no turning back now. I FINALLY did something! I started.

 

Anyway, the First Call is what was funny....

The FSBO ad had "chris" as the contact. I called and got the voicemail of an investment company. Oh brother, that's what I was trying to avoid calling right off the bat (investors and realtors) That's not what is funny though. What's funny is that my husband has a brand new business fixing construction equipment, and last week he signed up the very same "chris" as a new customer! What a small world!

 

SO., I made call number 2 to another FSBO. The seller answers and holy cow, she is interested! Now, whether it works out or not, it's pretty inspiring that the very first person I talk to is interested! WOW! I can see the potential for this business.

 

She asked a lot of good questions (tenant trashing the place, if payments were made to escrow, how long a lease, ETC, ETC!) I think I was a little confusing at some points and can see where I need some better answers to questions but either way, It went well enough that she wants to see it "on paper". One point for me is that when she said I would need to make an appointment to see the house, I said I really didn't need to see the house, at least until we find out if we can work something out. I am calling her back on Tuesday to discuss further (she's out of town till Mon night) I need some help constructing my offers... please!

 

Here's what I found

Her house is priced at 279,900. She recently replaced the carpet, put in travertine, redid kitchen, solar water heater, pool replastered a year ago. Basically it is in nice shape according to her. She says the house down the street is on sale for 20k more and is not as nice. She feels this is priced for a fast sale and seems like Price is her sticking point. She was trying to sell this 6 mos ago with a realtor but wasn't having much luck and took it off the market. Screwup #1 is that I didnt not ask her if she was working with a realtor NOW. Duh, I know. I will get my mother in law realtor to run some comps for me tomorrow but my gut is she's high on price.

 

She says she hadn't thought about payments (she's trying to sell) but thinks the payments should be about 2000/mo. Again, seems high. Using HER price, I amortized the $279,900 at 6.11% interest and came up with $1697/mo PI payment. I would try to put the t/b payments about there (if the rents in the area support it) I have the Sunday paper for the last 3 weeks and will look to see if I can figure out rents for the area buy looking in FRBO.

 

when I asked what she owed, she claimed it to be $150k, but the county recorders office shows last recorded deed of $72k in 2004. There are some other discrepancies as well. She says its a 4/2 at 2200sf but the records show it being a 3/2 at 2107sf. It does show "improvements" at $18000 so I figure she must have added on a room. Don't know if it's permitted or exactly where to check (dept of planning and development, unless there is a building permit dept)

 

I took a look through the recorded docs and there a LOT under her name. It seems like her and this "unmarried man" have bought a few properties together. There are also several liens recorded against her (in the 500 to 1500 range) Some are for medical reasons and some are mechanics liens. Those mechanics liens worry me. I only see one recorded release for 1 lien. I want to do this as a CA, or at least propose it, but I am not sure if this is a unstable seller or if I am looking too deep. The reason she is selling is that she has another house and this one is vacant. She wants this sold NOW.

 

She obviously knew something about LO too, judging by the questions she asked. She said she "understands there is some sort of option payment" I did not like my answer when I said that yes, the t/b did pay an option payment for the option to purchase the house. I didn't tell her that I planned on keeping that. I need to know how to clear that up with her and a better reply for that question next time it comes up. Any ideas on how to handle that question in the future? She also was asking about equity reduction. Uggh! I hope she is not seeing through my newness and trying to take advantage. Either way, I just need to structure my deal and figure my bottom line to stick to.

 

She is out of town until Monday night. She wanted me to call her back on Tuesday and took my name/number as well. I have to come up with some numbers for her before then.

 

I am thinking pitching CA because that is what I want to do. Also, because I think she will want a high price and there won't be much room for me in the middle. That said, we are skipping along the bottom and I don't want to be OVER market price, even on a CA. I STILL have to mark up the selling price to cover MY option money, and maybe the rent credits.

 

I know the rent is going to be too high and need to figure out my approach to telling her that. maybe bluntly like ... market rents show to be about X, and, the ammortized rate comes in at only $1697. We'd need tp get it more about 1600 or so to attact a t/b.

 

So, my question at the end of this novella is what do you think of this seller? the potential for a deal? all those recorded deeds/liens? and most important, how to structure my offer when the sellers hot button seems to be the price?

 

Would it be wierd to pitch CA AND SLO? as choices on paper? Might be just too much for me to try and i might confuse her away from choosing anything. Also, I'd have to show pretty drastically different price/terms to give me the meat to stay in the middle.

 

Oh enough already! Thanks to all of you who read that whole thing! I did try and keep it short too!

[Doug Pretorius (ON) 9]

Hate to rain on your parade but I find that people (sellers or buyers) who ask a lot of questions, never do the deal. I'm not talking 50% or even 80%, but 100% without fail they're just fishing for information. It's so obvious to me now that I ignore their questions and ask my own. If they're serious they will give me the answers I'm looking for, if they continue to barrage me with questions then I end the conversation as politely but as quickly as possible. No thank you I'm not in the business of educating sellers how to do RTOs!

 

If sellers ask: "How does this work?" I tell them: "I'll rent the house for a few years with the option to buy." And that's it. If they ask crap like how do I find my buyers, how much option money I'll be getting, how I can get T/Bs to stick to the agreement etc etc. I know they're full of it.

 

I notice that your seller brought up the option money. She's telling you that you don't deserve that money and she's going to do everything in her power to rip you off of as much of it as possible. If she can get you to find her a T/B for free, she'll be only too happy to take it all.

 

Personally I think this seller isn't the least bit motivated. She's asking too many questions and they're the WRONG kind of questions to boot. She may be willing to RTO but she's asking too much all around, too much of the buyer, and too much of you.

 

I would be very blunt with her at this point. State the terms your research shows the market can bear and if she doesn't like it, to heck with her. There are 10 million sellers where she came from!

[GetErDun 0]

I notice that your seller brought up the option money. She's telling you that you don't deserve that money and she's going to do everything in her power to rip you off of as much of it as possible. If she can get you to find her a T/B for free, she'll be only too happy to take it all.

 

Personally I think this seller isn't the least bit motivated. She's asking too many questions and they're the WRONG kind of questions to boot. She may be willing to RTO but she's asking too much all around, too much of the buyer, and too much of you.

 

I would be very blunt with her at this point. State the terms your research shows the market can bear and if she doesn't like it, to heck with her. There are 10 million sellers where she came from!

 

 

Thanks Doug. I don't care if you rain on my parade. I appreciate the input and don't want to screw myself with a bad deal Its funny that you mention her wanting the service for free because that thought did cross my mind. I used to have a business where I sold my product over the phone (all referrals, no cold calls) and I could instantly recognize what "type of person" I was speaking with and how to approach them. I don't yet know how to spot the tire kickers vs those who want it for free vs the motivated sellers

 

Here's some of what she asked in no particular order

Length of lease to t/b

would their payment be made through escrow

tenants trashing the place

how I determine rent

principal reduction

option fees

security deposit

Dang, I don't think I need to go any further. Just typing that I feel like I should have recognized a fishing expedition.

 

That said, I still plan on completing the "proposal" if just for the experience.

 

I drove through her neighborhood just now because I'm new and I needed to see for myself. Nice house, well kept. The other houses for sale in the neighborhood do seem to support her price (but these are active listings, not SOLD comps) Don't have those comps yet from my mother in law.

 

She was thinking 2200 for rent but I am seeing rent going for about 1000 in the area (that is wilh limited data, but one house down the street (close to the apt complex, yuck) is the same bed/bath and only a little smaller at 1800sf. It is $995 rent through a property management company. I give that some weight because I hope the prop mgmt co would have researched it. I know, I still have to do my homework.

 

So, the price she is asking might be ok but I still need to get it down a bit to make room for MY option money ;D Also, she'll probably sh** a brick when I tell her rents are about HALF of what she was thinking. It's screwy. The $279k ammortizes to almost 1700 but the rents are way below that. I could probably go 1200-1400 depending on the rent credits. I wish I knew what she really had in equity. I'll have my mother in law realtor check the records on that. Her data is more accurate than what I currently have.

[Doug Pretorius (ON) 9]

Length of lease to t/b

would their payment be made through escrow

tenants trashing the place

how I determine rent

principal reduction

option fees

security deposit

Ouch! Pretty much says it all right there. But don't feel bad, this was your first live call! It took me 7 years to figure out that I was saying too much LOL!

 

Sounds to me like you're in a fantastic market for SLOs. Here's how you do it... you BUY for market rent, and then you SELL for mortgage amortization. Looks like you can easily make $600-$700/month cash flow on the houses in her neighborhood.

[GetErDun 0]

Length of lease to t/b

would their payment be made through escrow

tenants trashing the place

how I determine rent

principal reduction

option fees

security deposit

Ouch! Pretty much says it all right there. But don't feel bad, this was your first live call! It took me 7 years to figure out that I was saying too much LOL!

 

Sounds to me like you're in a fantastic market for SLOs. Here's how you do it... you BUY for market rent, and then you SELL for mortgage amortization. Looks like you can easily make $600-$700/month cash flow on the houses in her neighborhood.

 

Well that's good tip to know for when I call on the FSBO and a FS/FR by owner signs I saw a couple streets down from her.

 

Obviously, the attractiveness of the LO is what makes people pay the option money and over market rent but It seems like it would be much harder to find t/b with rent that far above straight rentals in the area. ??

 

Thanks Doug!

[Doug Pretorius (ON) 9]

much harder to find t/b with rent that far above straight rentals in the area

Yes it would. So you don't market it as a rentla, you market it as alternative bank financing.

 

Give it a try. It might not work in your area but it does in mine.

[spleano 0]

Here's some of what she asked in no particular order

Length of lease to t/b

would their payment be made through escrow

tenants trashing the place

how I determine rent

principal reduction

option fees

security deposit

My 2 cents.

 

Before I discovered the forum, I approached a FSBO over a year ago as a listing agent. He had been trying to sell his house for about 6 months. (I didn't get the listing. He didn't like my terms. I don't pull any punches so, lots of people don't like my terms. That's OK, I don't have a bunch of immovable inventory.) After he didn't have any luck as a FSBO he decided to go the discount agency route but, 6 months later, still no luck so, I gave him a call and offered a lease purchase. He was very interested. I volunteered to send him some information. I had a whole FAQ's brochure about LOs. It outlined a LO, touted the benefits, explained various management techniques I would use to assure the property was respected, summarized how I would require mortgage and credit counseling programs, etc. How could anyone pass up my service? I was so proud. I thought it was just enough information to make anyone realize that LOs are not a part time effort and are better left to experts. Well, guess what? One LO does only take a part time effort and you certainly don't need to be an expert to find someone to lease option your own home.

A week later the seller had secured a tenant/buyer and the house was occupied. Who knows if he did it right and who cares? I don't have it!

As Doug Pretorius keeps making me understand, how our LO program functions is not up for debate or grapple with sellers.

This is our lease purchase program and these are the papers that need to be signed. The end.

 

Agent Dino

[happyardy 0]

I will get my mother in law realtor to run some comps for me tomorrow....

 

Your mom-in-law is a realtor?..Thats a gold mine right there, dude...comps, expired listings, network etc..

- Rahul

[Doug Pretorius (ON) 9]

I had a whole FAQ's brochure about LOs.

Oh man! Been there, done that, have the scars to prove it! I spent at least a solid week writing up my Pre-Appointment Package, WestCoastGirl even proof read it for me and helped me improve it. It was truly a thing of beauty. What a damn waste!

 

This is our lease purchase program and these are the papers that need to be signed. The end.

Abso-friggin-lutely!

[GetErDun 0]

I will get my mother in law realtor to run some comps for me tomorrow....

 

Your mom-in-law is a realtor?..Thats a gold mine right there, dude...comps, expired listings, network etc..

- Rahul

 

You'd think that being family it would be that way, but not quite. She is a VERY TRADITIONAL realtor. She thinks most investors are crooks, even though she says she works with some. I had found myself a good possibility on a flip and she told my husband that maybe she should go down there and find out what is going on . She assumed that poor old mexican lady who owned it was being taken to the cleaners. Real story, house vacant and TRASHED (uninhabitible) by her wonderful loser son. She wanted out and sold. Long story short, she could be that goldmine if I can successfully "retrain" her LOL

[GetErDun 0]

Before I discovered the forum, I approached a FSBO over a year ago as a listing agent. He had been trying to sell his house for about 6 months. (I didn't get the listing. He didn't like my terms. I don't pull any punches so, lots of people don't like my terms. That's OK, I don't have a bunch of immovable inventory.) After he didn't have any luck as a FSBO he decided to go the discount agency route but, 6 months later, still no luck so, I gave him a call and offered a lease purchase. He was very interested. I volunteered to send him some information. I had a whole FAQ's brochure about LOs. It outlined a LO, touted the benefits, explained various management techniques I would use to assure the property was respected, summarized how I would require mortgage and credit counseling programs, etc. How could anyone pass up my service? I was so proud. I thought it was just enough information to make anyone realize that LOs are not a part time effort and are better left to experts. Well, guess what? One LO does only take a part time effort and you certainly don't need to be an expert to find someone to lease option your own home.

A week later the seller had secured a tenant/buyer and the house was occupied. Who knows if he did it right and who cares? I don't have it!

As Doug Pretorius keeps making me understand, how our LO program functions is not up for debate or grapple with sellers.

This is our lease purchase program and these are the papers that need to be signed. The end.

 

Agent Dino

 

Oh, now that burns! I bet your brochure was beautiful. Too bad you just can't share lest you get taken advantage of! Baystards!

 

I can see that I do have a bit to learn about the "types" of sellers/buyers out there. My last business I told the people ALL about every detail on what I was selling... then again, they could only buy it from me. My eyes have been opened to this businesses leaches, I just hope I learn to spot them faster.

 

Yeah, this site is the BEST. I knew I would get some good help when I needed it. Thanks so much Dino and everyone!

[GetErDun 0]

much harder to find t/b with rent that far above straight rentals in the area

Yes it would. So you don't market it as a rentla, you market it as alternative bank financing.

 

Give it a try. It might not work in your area but it does in mine.

 

 

It's worth a shot. That would be pretty bitchin if it worked.

[Doug Pretorius (ON) 9]

I do have a bit to learn about the "types" of sellers/buyers out there.

There are basically 6 types and this applies to both buyers and sellers, but let's look at the seller side since nothing happens until we have a motivated seller.

 

Type #1: Sellers who are not interested in L/O and are determined NEVER to become interested!

 

Type #2: Sellers who are not interested right now, but indicate that they may be open to it in the future.

 

Type #3: Sellers who are interested but don't want you to make any money or want to fish for info so they can do it themselves.

 

Type #4: Sellers who are interested but can't give you a good enough deal.

 

Type #5: Sellers who are interested, agree to terms that work for you, but never actually sign.

 

And finally, type #6: Sellers who are interested, agree to your terms, and sign with delight!

 

1 and 2 are easily determined by asking if they're interested in renting (or selling if they're FRBOs). 3 identify themselves quickly by asking too many questions! 4 is quickly eliminated by talking terms. 5 can be frustrating if you wonder where you went wrong. The reality is that sometimes they're just not as motivated as the answers to your questions might make it seem. However 5's are also really exciting because if you're getting a steady stream of them you know it's just a matter of time before one them is actually a 6!

[MichaelC 160]

Interesting thread, but I don't know that I would take as hard a line as Doug. Overall, though, I have to agree that the kinds of questions this homeowner is asking is very indicative of someone who wants to know how she can do what you do. Between the questions and the fact that her numbers don't seem to be realistic, I wouldn't break a sweat over this one. But I do think you should "use" the homeowner, just as she is attempting to get some use from you. What I mean is use her as a learning tool. Get a feel for her way of thinking, enjoy and benefit from the experience. The shrew wants to give you lemons? Make lemonade.

And a big congratulations for getting off your duff and making those calls! It's a start, but don't sit around patting yourself on the back just yet. Keep the momentum going.

[GetErDun 0]

Interesting thread, but I don't know that I would take as hard a line as Doug. Overall, though, I have to agree that the kinds of questions this homeowner is asking is very indicative of someone who wants to know how she can do what you do. Between the questions and the fact that her numbers don't seem to be realistic, I wouldn't break a sweat over this one. But I do think you should "use" the homeowner, just as she is attempting to get some use from you. What I mean is use her as a learning tool. Get a feel for her way of thinking, enjoy and benefit from the experience. The shrew wants to give you lemons? Make lemonade.

And a big congratulations for getting off your duff and making those calls! It's a start, but don't sit around patting yourself on the back just yet. Keep the momentum going.

 

Thanks for the congrats. I literally spent 30 min before each call just getting up the nerve to press send. Sad, but true. I know that will pass with experience and confidence. I'll just have to suffer through. I'm totally ok with this deal not working but I want to approach it as if it could. I want to handle tomorrow as best as I could. You're right, it is good practice. I haven't made other calls, I just want to get this one done first.

 

This isn't just pointed at you MC, but for anybody that has suggestions....

 

I am a bit confused as how to best approach this tomorrow. I just can't seem to clarify it in my head (and I know it is just lack of experience that does this to me)

 

I am still waiting on those comps but it looks like her price is reasonable, if even a bit low (as she said) Houses are on the market for same or higher than hers and they are quite a bit smaller. I know, active listings don't tell the full truth, but they are a good indicator.

 

However, rents are 1000-1100 and I already screwed it up for a SLO by telling her I would probably decide the rent amount by amortizing the purchase price. It comes to 1697. Wish I would have told her well, rentals around here are going for about blah blah. I didn't realize I was screwing myself until it was done. Doug. you mentioned putting it out there as alternative financing. I worry that may cause problems with "equitible interest" should I or the seller need to boot the t/b.

 

If the comps do come in and show I could sell this for 299, I might consider the SLO, BUT it is still a declining market (slow decline bu still) And she'd have to come down on that rent a LOT because there is no way in hell I would agree to pay over regular market rent on an SLO. I want that to be 800-1000, not 2k/mo. No way

 

As far as the CA, who knows, maybe she suprises us all and bites. If so, how do I handle telling her the option money is MINE, youhear me, MINE, back off! Really, how do I explain that the option money is how I get paid. I guess just that it isn't taken "off" what they will get, I actually factor it in when selling and add on, so the seller really doesn't pay it. OH, I can already tell thats TMI, Any suggestions on how to tactfully clear it up?

 

So, SLO or CA?

how to get her to understand the option is mine ARRGH Matey!

She will be the landlord (if ca) We didn't really discuss that