Guest SouthWestHomeBuyer Report post Posted August 31, 2003 Hello, My first post here.. As mentioned in some posts as wether to give 50-100% rent credits. Are not rent credits given when the rent is paid on time, and IF they buy? Would you not specifically put that into your contract? If they pay late, no credits. If they don't buy, then there is no equitable interest in the property because they never had title, therefore no credits would be allowed. Does this make sense? By the way i am trying to complete my first L/O deal on selling my own house. I have got to get this thing off the ground for my families sake. Heres the deal. I have a home with a seller carry at 8% for 5 yrs. I have been marketing a l/O now with some prospects . (though I have not even begun to search for a new deal for my own place). I actually have given the seller a letter asking for a discount considering all the work i had to put into the place. Whether he accepts it is another story. Well, i am trying to refi so i can cash him out or do you guys think I should not bother, just L/O and wait for the t/b to cash me out and ask for the dicount then? if any opinions, iwould greatly appreciate them. Thanks. Mike S. AZ www. SouthWestHomeBuyer.com Share this post Link to post Share on other sites
MichaelC 160 Report post Posted August 31, 2003 Hello, SouthWestHomeBuyer, and welcome to The Naked Investor.Hello, My first post here.. As mentioned in some posts as wether to give 50-100% rent credits. Are not rent credits given when the rent is paid on time, and IF they buy? Would you not specifically put that into your contract? If they pay late, no credits. If they don't buy, then there is no equitable interest in the property because they never had title, therefore no credits would be allowed. Does this make sense?You are absolutely on target here. Everything you said is correct.Mike, you lost me with that second paragraph. Are you trying to sell your own residence? Or, are you the tenant/buyer in the deal and trying to arrange some financing? Share this post Link to post Share on other sites
SouthWestHomeBuyer 0 Report post Posted August 31, 2003 mike C, I am the owner of the house looking to sell on a lease option or maybe a wrap . any advice? Mike S. Share this post Link to post Share on other sites
-Tony- 0 Report post Posted September 1, 2003 SouthWestHomeBuyer, I actually have given the seller a letter asking for a discount considering all the work i had to put into the place. Whether he accepts it is another story. Well, i am trying to refi so i can cash him out or do you guys think I should not bother, just L/O and wait for the t/b to cash me out and ask for the dicount then? You could always use the aproach Mr. seller I know you want your money from this house. With all the cash that I have put in this place I don't think I could do that for a while. Unless maybe you could give me a discount for cashing you out earlly. Is this something that may interest you or maybe not (use a little Conti and Finkle on him). Just a thought. MichaelC, Love the new spell check 100 times faster Share this post Link to post Share on other sites
MichaelC 160 Report post Posted September 1, 2003 Mike, as for selling or lease purchasing your own residence, it shouldn't prove difficult. Of course, local market conditions will have a bearing on how quickly you do so. But, even if you are in a buyer's market, offering terms usually will make for a quick process. First, have you done your due diligence and make an accurate determination of the rent you can expect to receive, and the realistic purchase price someone should be willing to pay you? That's the first step. Pricing oneself out of the market is a common mistake among FSBO's.How are you marketing your house? Newspaper ads? Signs?My usual ad is simple but very effective: RENT TO OWN! 50% rent credit!!3BR, 2BA, 2CG, 1700sf. Xlnt area.Only $1,200/mo. $169K!123-456-7890Something along these lines makes the phone ring. The rent credits are key to that. Heck, offer 75% or even 100%. I have. You know that in most deals the option is not going to be exercised. So, that $10,000 in rent credits you are concerned about is moot. If they do end up buying, much of those credits have been built into the purchase price. In the meantime, you have secured a deal on your property quickly, and the tenant/buyers have much to lose if they don't pay in a timely fashion and maintain the property. For us, this usually translates into another property on "auto-pilot".By the way i am trying to complete my first L/O deal on selling my own house. I have got to get this thing off the ground for my families sake. Heres the deal. I have a home with a seller carry at 8% for 5 yrs. I have been marketing a l/O now with some prospects . (though I have not even begun to search for a new deal for my own place). I actually have given the seller a letter asking for a discount considering all the work i had to put into the place. Whether he accepts it is another story. Well, i am trying to refi so i can cash him out or do you guys think I should not bother, just L/O and wait for the t/b to cash me out and ask for the discount then?As for asking for a discount, that's always a good idea. Why not? Many homeowners prefer cash today, and the homeowner just may surprise you and say yes. As to whether or not you should bother to refi, that's a decision for you, Mike. When is the payoff due to the seller? What do you prefer? Can you refi with attractive terms? Will a lease purchase deal suffice at this time? etc.... Share this post Link to post Share on other sites
MichaelC 160 Report post Posted September 1, 2003 Love the new spell check 100 times fasterTony, I ame to pleze. Share this post Link to post Share on other sites
SouthWestHomeBuyer 0 Report post Posted September 6, 2003 Michael C, I dont have perfect credit (score of @ 560+/-) but the bank said they might get me 90% depending on appraisal. I still have 4 years left on the balloon so i am not pressed. I dont know what terms the bank will offer yet but i di get the seller to accept $5k off for starters , I am going to ask for at least $8k ( which would have been a broker commission on the deal any way). I have until 12/31/03 to cash him out at the discounted amount so it may make sense if i could cash out a bit save $100. a mo and then L/O for a higher price. I dont want to go too high because the T?B has to qualify eventually. So how would I recoup a 50% or 100% rent credit unless you inflate the price? Any comments? Mike S AZ Share this post Link to post Share on other sites
MichaelC 160 Report post Posted September 6, 2003 I have until 12/31/03 to cash him out at the discounted amount so it may make sense if i could cash out a bit save $100. a mo and then L/O for a higher price.I'd move on the refi quickly. Three months can pass soon, especially if an unexpected glitch appears during the process. Not to mention that rates have risen about one and a quarter percent in the past month. Also, the note holder has already agreed to a discount. You should hustle to take advantage of it. Check locally for good deals, and check the funding forum here. A few members are posting some rather terrific terms and deals that they have available.I dont want to go too high because the T?B has to qualify eventually. So how would I recoup a 50% or 100% rent credit unless you inflate the price?That's exactly what we do: inflate the price. The lease option market is different than the retail market. When folks go to one of those Rent to Own appliance stores, they know and accept the fact that they are paying a premium price for that big screen TV. However, they are getting terms and getting that TV today, and so are willing to pay for it. It is this same mentality with tenant/buyers. You give terms. They pay the price. So, yes, we build the rent credits into the purchase price.The question becomes, "What happens if the appraisal doesn't come in at that higher price?" Have you ever noticed that most every appraisal ordered comes in at the purchase price? Unless your price is so far out of line as to be ridiculous, the appraiser will almost always find a way to justify the purchase price and allow the deal to complete. On the other hand, say the price doesn't appraise. You can carry a small note for your tenant/buyers for several thousand dollars for terms that both parties agree to. Now, you have some monthly income, or you can sell the note if you prefer cash. Share this post Link to post Share on other sites
-Tony- 0 Report post Posted September 6, 2003 SouthWestHomeBuyer, When you finance the house finance it for the original price. Get the 5k as some type of allowance (maintenance allowance). this way there will be little or no cash out of pocket to you. Maybe even a little back depending on the closing cost. As for rent credits and padding the price, if you don't feel comfortable with it don't do it. Just add on at least 10% for appreciation and if it doesn't appraise you can hold a note or you can still come down. My area appreciation is 5%. The extra five is a cushion for me because you can always come down but you can't go up. Now, if you find yourself holding the property and not getting a t/b you might think about rent credits example your price 90k fmv 100k l/p 1 yr rent 1k finance 110k rent credit sell 115 with 40% rent credit finance 110.2k now with rent credit this not only will increase your on time payment (because you don't give RC if they are late) but could increase your back end if they are late.... The fact is you need to do what is comfortable for you..... good luck Share this post Link to post Share on other sites
SouthWestHomeBuyer 0 Report post Posted September 7, 2003 Thanks guys! eom Share this post Link to post Share on other sites