Ready to Go

[Shar NJ 1]

I have been perusing this site for several months and also read the manual twice. I have my attorney tweaking the contracts to mesh with NJ laws and I am ready to get started! As soon as I can get over this fear I am good to go

 

Questions:

 

1) I am planning to send out direct mail to expireds, contact newpaper and craigslist FSBO and FRBO, and put up bandit "We Buy Houses, We Take Over Payments" signs so I soon expect to by working with a multitude of buyers and sellers. Can anyone recommend a database for keeping track of my contacts? I can use gmail but I am wondering if there is anything more sophisticated; on the other hand maybe simpler is better.

 

2) My background is in mortgages so I am planning on giving my T/B credit counseling and I fully intend to have them exercise the option within 12-18 months, 24 at the longest. How does it work with the title company when going to settlement on a L/O? Regarding crediting the option money and rent credits? How does it show up on the HUD-1? Is it actually a double closing?

 

3) Do you do a title search and home inspection when buying with a sandwich lease option as your exit strategy?

 

4) I am ultimately interested in rehabbing and selling outright too but I need to build my cash reserves. I am thinking about buying in a sandwich L/O, doing a "light rehab" which will be mainly painting, possibly carpeting, and staging to improve the house (weeks timeframe tops) before showing to tenant buyers; thus being able then to sell/rent the house at a higher price. Any thoughts on this? I do have experience in rehabbing/staging as well.

 

5) Lastly, should I require that the seller change their insurance policy to a non-owner occupied policy and then require my T/B to obtain renters insurance? Any other insurance considerations?

 

Thank you! I apppreciate your help in advance. I have found this forum and Michael's manual to be so helpful and I have learned so much to get this business started.

 

Shar

[MichaelC 160]

Hello, Sharyn. Good to hear from you. Let me take a shot at some of your questions. . .

 

1) I am planning to send out direct mail to expireds, contact newpaper and craigslist FSBO and FRBO, and put up bandit "We Buy Houses, We Take Over Payments" signs so I soon expect to by working with a multitude of buyers and sellers. Can anyone recommend a database for keeping track of my contacts? I can use gmail but I am wondering if there is anything more sophisticated; on the other hand maybe simpler is better.

I am decidedly lo-tech. I'm an email and Post Its kind of guy. I'm sure there are some here with a much sleeker approach than that. Someone will come along with some opinions.

 

2) My background is in mortgages so I am planning on giving my T/B credit counseling and I fully intend to have them exercise the option within 12-18 months, 24 at the longest. How does it work with the title company when going to settlement on a L/O? Regarding crediting the option money and rent credits? How does it show up on the HUD-1? Is it actually a double closing?

Depends on the type of deal and the title company involved. For example, a Cooperative Assignment won't require any type of double close since you long ago assigned the deal. A sandwich lease, on the other hand, would be handled much differently. Why not contact a title company or two and ask them how to best work together for a smooth closing.

 

3) Do you do a title search and home inspection when buying with a sandwich lease option as your exit strategy?

If you're in the deal long term, protect yourself and play it like you're buying the house today. Meaning, yes, a title search and inspection.

 

4) I am ultimately interested in rehabbing and selling outright too but I need to build my cash reserves. I am thinking about buying in a sandwich L/O, doing a "light rehab" which will be mainly painting, possibly carpeting, and staging to improve the house (weeks timeframe tops) before showing to tenant buyers; thus being able then to sell/rent the house at a higher price. Any thoughts on this? I do have experience in rehabbing/staging as well.

Keep in mind there is some risk with this approach. If you enter a sandwich lease you don't yet own the property. So if you then go and put some cash into repairs and then are unexpectedly unable to exercise your option, you're out of luck. Be sure to have a Plan B for taking title if going this route.

 

5) Lastly, should I require that the seller change their insurance policy to a non-owner occupied policy and then require my T/B to obtain renters insurance? Any other insurance considerations?

Again, if you're into the deal long term, it's wise to protect your position in the deal. If doing a CA, no need to bother with this.

[pilot76180 51]

In regards to a database, I don't use one for the seller leads, just old fashioned notepad and papers. I print off the tax records of each seller lead and have a notepad for seller leads that I keep together.

For buyers, I use an Excel sheet that gets sent to an outsourcer I use that puts together our weekly newsletter, and people can also sign up for the newsletter online via our site, so that's out TB database.

 

On a CA, the Option Fee is shown as Earnest Money on the Hud, and rent credits are seller concession. Sometimes the underwriter requires a sales contract with the file, sometimes not. Normally they just take our Option to Purchase.

 

In regards to a sandwich lease, my personal opinion is that you should do CA's for a year before doing a SLO. By doing CA's for a year you REALLY get to learn your market and get paid while doing it. That way when you start doing SLO's, you are very educated.....just my opinion.........

[speedingpenguin 19]

I use RealProspect to manage my buyer and seller leads as well as handling my direct mail marketing campaigns. With RealProspect you also have the ability to manage email campaigns as well, though I haven't really used that feature yet.

[Shar NJ 1]

Thank you everyone for your help. I plan on doing SLO's and sometimes CA's, I like being in on the deal and enjoy property management. I am well versed on many aspects of real estate and I know my market well. I went over all these questions with the attorney as well and he did point out, which is important to consider, that regarding insurance it is important to know if the mortgage requires the property to be owner occupied. He said as long as I do my due diligence and make sure that they didn't gain a certain interest rate that specifically states that the property remain owner occupied I should be fine with insurance and the due on sale clause.

 

Thank you for the suggestion, I value your advice and appreciate your feedback. I will let everyone knows how it goes!

[<Steve> 82]

Hey Shar-

 

I like SLOs too. I can and do make thousands of dollars more on each deal as compared to just doing CAs. Although I do more CAs than SLOs SLOs are more work and you have to manage the tenant/buyer and seller which can be a hassle at times. You also have additional business cost, so a reserve set aside is a good thing. I have some SLOs going on 5+ years and seeing how they perform, they would make great keepers as an investment property to purchase long term.

 

It sounds like you have experience in property management? Before getting into L/Os I would buy and hold rental properties, so the transition to SLOs was easier. What is great about SLOs is that I didn't have to use any of my own cash or credit. A true No Money Down deal!

 

For me it is currently a bit tougher to get SLOs due to the price drop in real estate, resulting in less equity in the deals, but I am always on the hunt for a good SLO deal!

 

Here's to your success!

[Shar NJ 1]

Yes, I do have some experience in property management.

 

After considering the factors, I am thinking of doing some CA's to get started and help me get over my FEAR! My property management experience comes from renting out properties I was trying to sell, properties we had rehabbed and then the market crashed. Due to that and also a personal tragedy I ended up losing everything!

 

I am starting all over again and I have been studying this site and books for about 6 months now. Today is the day I am going to begin marketing.

 

The antidote for fear is action. Thanks for everyones help and advice, have a great weekend!

[MichaelC 160]

Shar, you know more than you realize and you are more than prepared for this. Move ahead with full confidence. We've got your back.

[speedingpenguin 19]

Yeah the coolest part about lease purchasing is the risk involved.... ZERO!

 

I've got 3 properties under contract right now, total out of pocket (not counting marketing) expense? $0.00

 

If I'm unable to find buyers (worst case scenario), my total loss will be under $10 (Was given a bunch of blank bandit signs from a friend, a dozen roofing nails probably valued at under .75 cents total, some wooden stakes for some signs probably 3 or 4 bucks... you get the point ;-)