The current Market's Affect

[DeeLight 8]

These are questions for all you experienced veteran l/o investors out there:

 

 

1) How has the current market affected the l/o's appraoch to crei?

2) The stats are that we are becoming a nation of renters (in usa) does this affect the l/o biz positively?

3) How is the current stringent (stingy) allowance of who gets a loan affecting people puchasing your l/o

4) In what ways have you had to adjust course over the last few years?

 

Thank you very much!

[MichaelC 160]

I'll speak specifically for my market, but there are probably many similarities between it and others.

 

1) More motivated sellers since the bust than I could have ever imagined. But many are upside down and the numbers in the deal don't lend themselves to anything but a Cooperative Assignment if you're trying to do a lease purchase. A sandwich lease on a property with a $1500/mo market rent but a $2K/mo PITI doesn't make sense.

 

2) I'm not familiar with those stats, but I would say that given the opportunity most renters would prefer to be owners. A Rent-To-Own fills that need.

 

3) It's definitely a challenge to get t/b's financed. A challenge, but far from impossible. With a plan in place from the beginning of the lease, most of the tenant/buyers should be able to qualify. If not, it would probably be evident from the rental app, in which case you shouldn't place them in the property.

 

4) More marketing and time required to fill properties; focus on CAs versus sandwich leases;

[DeeLight 8]

Thank you Michael.

 

1) I don't even know enough yet to know what a CA is but I have heard that in some cases the seller agrees to pay a certain amount over what the prop can be rented for. heh maybe that's what a CA is :~?

 

2) Yes, I've heard the stat through a couple different sources. But of course, you are right, they would like to be a home owner if they could. I've also heard that the boomers are looking for smaller abodes as they downsize. This could bring more t/b's for smaller props. Just my inexperienced thought. I am sure you would know best. I know here in SoCal there is a market for 1+1's and 2+1's. Heck even garages could be rented lol. Very competitive here, especially along the coast where I live.

 

3) I've met people that have companies that offer credit repair to their l/o t/b's toward the goal of getting them financed at the end of the contract. I've also read that some people using l/o as their main biz don't care about if the t/b can qualify or not because they get to rinse and repeat repeatedly on the same prop. I guess these are all things I will learn as I go along.

 

4) I haven't cherished the thought of being a landlord again. Done that a couple of times but I lived on the prop. With my plan to do ooa deals it's a bit nerve wracking. The thing is, for me, life happens. I don't look so purty on paper but I am the world's best tenant. I may have to put away my desire to help others (that could truly deserve it) and become a numbers kinda gal but it's a challenge.

 

I am very excited about this new venture. I will begin marketing on Monday. YAY!

 

Thanks to you Michael and all the fun people/investors here at NI ; >

[<Steve> 82]

Great thread. I am also finding that many tenant/buyers have gone through the consequences from the down turn and are on the back end of their fall. So, there are some good potential tenant/buyers who want to get back on their feet and willing to work to get their ducks in row and buy a home.

 

Also as we are in sales, I think having the attitude of just getting the deal and not caring, and to just place a warm body in the property to just get the deal done, then move on, is a losing strategy long term. Rent-To-Own is more popular today than it was, and sellers and buyers are savvier. You don’t have to be a charity, but having a genuine concern for the sellers and buyers problem and working to solve it, brings in more deals from repeat sellers and referrals. I can honestly say that 50% of my deals the last couple of years are from repeat sellers and referrals.

 

Lastly, equity is harder to find for sure, so CAs are the main course. I would typically pick up 4 or 5 SLOs a year now maybe 1. I really like offering a 50% rent credit or higher, but I am finding as the numbers are tighter the rent credits need to be lower to make the deal work.

[MichaelC 160]

1) I don't even know enough yet to know what a CA is but I have heard that in some cases the seller agrees to pay a certain amount over what the prop can be rented for. heh maybe that's what a CA is :~?

Cooperative Assignment. Do a search on the board and you'll find a day or two worth of reading on this.

 

2) . . .I know here in SoCal there is a market for 1+1's and 2+1's. Heck even garages could be rented lol. Very competitive here, especially along the coast where I live.

Like south FL, SoCal has always been a hotbed of real estate. Large markets and population base. . .people on the move. . .if you're successful marketing, you'll do fine.

 

3) I've met people that have companies that offer credit repair to their l/o t/b's toward the goal of getting them financed at the end of the contract. I've also read that some people using l/o as their main biz don't care about if the t/b can qualify or not because they get to rinse and repeat repeatedly on the same prop. I guess these are all things I will learn as I go along.

I fall somewhere in between. I don't offer a formal credit improvement program, nor do I stick any warm body into a property. Every prospective t/b fills out a rental app and it's reviewed by the homeowner for their approval. I recommend and suggest they start the financing process as soon as they settle in and the boxes are unpacked. But after that, it's up to them.

[DeeLight 8]

Hi Steve,

Thank you for your insights. I like what you said about it working to the good of all. Our reputation precedes up and can follow us too and bite us in the arse hehee.

 

I'm saving that post!

[BTI 7]

Yes the stats are right, we are becoming a nation of renters. What the stats don't tell you is how many of those renters don't want to be renters and are trying to forge ahead and become homeowners when they get the chance. With the right knowledge you can make that happen for many of them.