Newbie with questions!!!

[bpmiller2 0]

Hello all!! I am new the the Naked Investor forums and relatively new to investing. I have been study the past 6 months and have determined that L/O's is the niche I want to focus all my efforts on. I just had a couple of questions, so instead of writing seperate posts for all questions I will just include them all in this one:

 

1. SLO Purchase - On a SLO, when the lease is up and the tenant/buyer is ready to purchase how does this work for me the investor. Do I have to do a "double close" where I purchase from landlord/seller at our negotiated price then close again with tenant/buyer at our negotiated price? Or, is there some type of wording in the contract that allows me to assign my right to purchase over to the tenant/buyer even though it would be at a highter purchase price?

 

2. Closing Costs - When negotiating a SLO, or a CA for that matter who will be responsible for paying the closing costs once the property is purchased. Do you set it up so that the Landlord/Seller always pays closing costs, or do you set up so that rent credits will cover closing costs, or does it vary by transaction? If it varies, then can you specify how you normally set it up.

 

3. Down Payment vs. Purchase Price - What wording do you use with your tenant/buyer when it comes to the deduction of option consideration and rent credits? Do you tell them it will be applied to the DOWN PAYMENT or the PURCHASE PRICE? If you say down payment, can they argue that the have an equitable interest in the property if they are unable to perform on the purchase and request refund?

 

4. OC: Pay to the order of? -- On an SLO and CA, who do you have the tenant/buyer make their option consideration payment to: you or the landlord/seller?

 

5. Marketing (website) -- For those that have a website as part of your marketing, do you have seperate sites for both sellers and buyers or do you just use one for both?

 

6. Marketing (direct mail) -- Is anyone sending out direct mail to apartment complexes for TB's ? If so, what kind of response have you had?

Thank you in advance for taking the time to answer my questions. I have reading other posts on this site and everyone seems very knowledgable and willing to help there fellow investors. I'm glad I found this site and look forward to interacting with everyone.

 

-Miller

[MichaelC 160]

Hello, Miller, and welcome to The Naked Investor!

 

1. SLO Purchase - On a SLO, when the lease is up and the tenant/buyer is ready to purchase how does this work for me the investor. Do I have to do a "double close" where I purchase from landlord/seller at our negotiated price then close again with tenant/buyer at our negotiated price? Or, is there some type of wording in the contract that allows me to assign my right to purchase over to the tenant/buyer even though it would be at a highter purchase price?

The deal can be closed either way you describe. It really depends upon the parties involved. Not only the homeowner, you, and the t/b. But also what the lender wants to do and the attorney or title company. As long as everyone has the same outcome in mind, the successful exercise of the option, the deal will get done.

 

2. Closing Costs - When negotiating a SLO, or a CA for that matter who will be responsible for paying the closing costs once the property is purchased. Do you set it up so that the Landlord/Seller always pays closing costs, or do you set up so that rent credits will cover closing costs, or does it vary by transaction? If it varies, then can you specify how you normally set it up.

Each deal is a separate entity. Typically, in a sandwich lease I agree to pay the closing costs as an enticement to get the homeowner to sign on. But then I pass them along to the t/b. Same thing with a CA. My paperwork stipulates the t/b will pay all allowable closing costs.

 

3. Down Payment vs. Purchase Price - What wording do you use with your tenant/buyer when it comes to the deduction of option consideration and rent credits? Do you tell them it will be applied to the DOWN PAYMENT or the PURCHASE PRICE? If you say down payment, can they argue that the have an equitable interest in the property if they are unable to perform on the purchase and request refund?

Option money and rent credits should never be promised to be a part of the down payment. That's between t/b and their chosen lender. Instead, the agreements state that these monies are a credit toward the purchase price, if the option is exercised.

 

4. OC: Pay to the order of? -- On an SLO and CA, who do you have the tenant/buyer make their option consideration payment to: you or the landlord/seller?

You always want to be in control. So whatever money is coming to you needs to be paid directly to you.

 

5. Marketing (website) -- For those that have a website as part of your marketing, do you have seperate sites for both sellers and buyers or do you just use one for both?

I'm not a big web/techie guy. So I'll leave this to those better able to assist you.

 

6. Marketing (direct mail) -- Is anyone sending out direct mail to apartment complexes for TB's ? If so, what kind of response have you had?

Thank you in advance for taking the time to answer my questions. I have reading other posts on this site and everyone seems very knowledgable and willing to help there fellow investors. I'm glad I found this site and look forward to interacting with everyone.

I haven't specifically targeted apartment complexes with mailings. But I have hit them up with flyers. Results were mixed, including a phone call or two from the onsite management office who told me to stop trespassing.

[bpmiller2 0]

Michael, thanks for responding. I wanted to follow up with you on doing a double close with the T/B. Now if I were to Double/Close wouldn't I potentially run into some "seasoning" issues, also, would I now be responsible for finding financing to close my part of the double close?

 

Can you explain how you would avoid the double close and do an assignment to the T/B to close the SLO and how would you avoid the T/B seeing the difference in which you agreeed to pay the seller and the price they agreeed to pay?

[MichaelC 160]

Now if I were to Double/Close wouldn't I potentially run into some "seasoning" issues, also, would I now be responsible for finding financing to close my part of the double close?

Yes, you could possibly run into seasoning issues. That is up to the lender involved. But an investor friendly mortgage broker should be able to assist with this. And no, if you are in the middle of a sandwich lease, there is no need for you to get financing. The deal just passes through you. Financing will be the responsibility of the end buyer, the tenant/buyer.

 

Can you explain how you would avoid the double close and do an assignment to the T/B to close the SLO and how would you avoid the T/B seeing the difference in which you agreeed to pay the seller and the price they agreeed to pay?

Check out the two pinned threads in this forum. There is a lot of good info about this very subject.

[<Steve> 82]

Can you explain how you would avoid the double close and do an assignment to the T/B to close the SLO and how would you avoid the T/B seeing the difference in which you agreeed to pay the seller and the price they agreeed to pay?

Check out the two pinned threads in this forum. There is a lot of good info about this very subject.

I don't even try double closing with the way the mortgages are now. To much explain'n. JRs relaease agreement works great to get paid at close or after close.

Check out the two pinned threads in this forum. There is a lot of good info about this very subject.