stoppayingrentnh.com 0 Report post Posted February 17, 2011 MC'S manual is opening my mind in a lot of great ways. I lost 2 deals when it came to talking about rent credit to a seller. I have one or 2 questions on this guys. If i don't tell the seller about it and only tell the T/B 50% or 100% rent credit. Would i have to make selling price higher. An example of pass scenario.Seller wanted 179k for his home,$1750/m for rent. Market showed 183k value. I had 2 buyers who wanted 100% rent credit,with 5k down and 6k the other,but we'll stick with the 5k. Should i have made the deal just simply by raising the selling price to 205k. I get 5k option money,seller gets their 179k,and buyer is happy with rent credit(21k). That meant they would have to buy in 1 year,or else they have to move out for seller to find a new buyer. I actually told the buyers a straight out no,thinking that never happens. The manual is showing me to try and be creative in every deal. Thank you MC,guys please help me understand it clearer. Share this post Link to post Share on other sites
MichaelC 160 Report post Posted February 17, 2011 Junior, it's good to see the gears are turning. I'm a big believer in generous rent credits. They get the phone ringing, emails coming in, and ultimately a t/b signed up. The key to making rent credits work is in the numbers. Let's look at the deal you referenced above.The homeowner wants to net $179K. You stated the market value is $183K. So for all intents and purposes he is wanting full price. Reality check: that ain't happening. If his house were listed with a Realtor at, let's say, $189K, (Agents inflate prices to get the listing), if he is lucky, six months later an offer comes in for his beloved $179K. But he needs to pay that Agent 6% commission. Meaning this homeowner's true net at closing is about $168K.I'm being generous here, too, Junior. In the real world, after six weeks on the market the Agent would have suggested the price be lowered from $189K to $184K. . .and then to $179K. Of course, that means the purchase price would probably be around $170K. And that means his true net at closing is around $160K. So your first job is to educate the homeowner to the realities of the local market. If they agree you can proceed and get a deal done to everyone's satisfaction. If not, let him fight the market on his own while you move on to better things.The key to these CA's is to make the homeowner understand the reality of their deal. Once that is done you can create a spread that allows you to make your option money, in this example that's $5K, and to factor in rent credits. All the while not pricing the property out of the market.In your deal here, if you were to market the house to prospective tenant/buyers at $179K, the homeowner's true net at closing would be around $163.5K: $179K-$5K option money-$10.5K rent credits (50% of rent price)=$163.5K. He would be netting about $3,500 more and doing so in six weeks rather than six months, plus receiving cash flow, plus retaining the tax benefits of homeownership. If that doesn't work for him, he isn't motivated enough at this time. Bottom line: get the homeowner to understand the reality of the local market, and make the terms to the t/b attactive enough to generate serious interest. If you can do that, the deals will fall for you. Share this post Link to post Share on other sites
Jason (AL) 1 Report post Posted February 17, 2011 I kinda got drawn into your benefits & figures*, amigo!Had I had a house for sale, I would've signed up right then and there!Cooperative assignments aren't too shabby for all parties involved, eh? *Normally, said to chicks. Share this post Link to post Share on other sites
MichaelC 160 Report post Posted February 18, 2011 I kinda got drawn into your benefits & figures*, amigo!. . . *Normally, said to chicks. Hey, who am I to judge another man's lifestyle? Share this post Link to post Share on other sites
stoppayingrentnh.com 0 Report post Posted February 18, 2011 Junior, it's good to see the gears are turning. I'm a big believer in generous rent credits. They get the phone ringing, emails coming in, and ultimately a t/b signed up. The key to making rent credits work is in the numbers. Let's look at the deal you referenced above.The homeowner wants to net $179K. You stated the market value is $183K. So for all intents and purposes he is wanting full price. Reality check: that ain't happening. If his house were listed with a Realtor at, let's say, $189K, (Agents inflate prices to get the listing), if he is lucky, six months later an offer comes in for his beloved $179K. But he needs to pay that Agent 6% commission. Meaning this homeowner's true net at closing is about $168K.I'm being generous here, too, Junior. In the real world, after six weeks on the market the Agent would have suggested the price be lowered from $189K to $184K. . .and then to $179K. Of course, that means the purchase price would probably be around $170K. And that means his true net at closing is around $160K. So your first job is to educate the homeowner to the realities of the local market. If they agree you can proceed and get a deal done to everyone's satisfaction. If not, let him fight the market on his own while you move on to better things.The key to these CA's is to make the homeowner understand the reality of their deal. Once that is done you can create a spread that allows you to make your option money, in this example that's $5K, and to factor in rent credits. All the while not pricing the property out of the market.In your deal here, if you were to market the house to prospective tenant/buyers at $179K, the homeowner's true net at closing would be around $163.5K: $179K-$5K option money-$10.5K rent credits (50% of rent price)=$163.5K. He would be netting about $3,500 more and doing so in six weeks rather than six months, plus receiving cash flow, plus retaining the tax benefits of homeownership. If that doesn't work for him, he isn't motivated enough at this time. Bottom line: get the homeowner to understand the reality of the local market, and make the terms to the t/b attactive enough to generate serious interest. If you can do that, the deals will fall for you.Thank you MC,now i know better than to just say NO. Educate and it will be smoother for all involved. I guest to always be in control by saying,something like,i will check the value,run some comps to see if we can work with you.Show sellers i am not desperate to buy their home or work with them. Share this post Link to post Share on other sites
lhenley 8 Report post Posted February 19, 2011 I fully understand how the Sales Price + Option Consideration + Rent Credits = FMV, and sometimes to get there with FSBO's, you show them what they'd actually NET if listed with a Realtor - Commission - Closing Costs, etc. Doesn't John take the price the seller wants, and adds his fee on top, or am I missing something? Lynn (FL) Share this post Link to post Share on other sites
MichaelC 160 Report post Posted February 19, 2011 Lynn, there are limitations to giving the homeowner everything they want. If the homeowner wants $250K and the house is worth $225K, you can't then market the house at $270K for the sake of pleasing the owner. You'll never move the property.What the homeowner wants isn't the deciding factor. The market determines the numbers. Share this post Link to post Share on other sites
lhenley 8 Report post Posted February 19, 2011 Yes, I understand, but was wondering if I was missing something, since it appears John is doing something different. Lynn (FL) Share this post Link to post Share on other sites
MichaelC 160 Report post Posted February 19, 2011 It's Saturday morning, Lynn. John is deep in the midst of yet another epic hangover. Be patient. By Monday he should be clear headed enough to respond. Share this post Link to post Share on other sites
