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ErikOk

More Texas Questions

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Since I am so close to the Texas border and have family in Texas that can make me aware of any good deals, I have been doing a lot of reading on doing deals in TX.

 

In the Texas Real Estate Commission Rules, it mentions in unbelievably simple language the following:

 

TRECrules.pdf

 

§535.5. License Not Required. [Adopted January 1,

2011]

(a) Acting as a principal, a person may purchase,

sell, lease, or sublease real estate for profit

without being licensed as a broker or salesperson.

{b} A person may acquire an option or contract to

purchase real estate and then sell it or offer to sell

it without having a real estate license.

 

One question is for John Jackson. Unless I misunderstood some of your prior posts about not being able to sandwich (sublease) in TX, can you please explain what lead you to determine that sublease is not do-able in TX? The above Section suggests otherwise.

 

Also, regarding issues with L/O's in TX, what if instead a Purchase and Sale Agreement is drawn up with a closing date of say 12 months from the P&S being signed? Then have the right to assign and the sole remedy for the Buyer defaulting is the Seller retains earnest money as liquidated damages.

 

TREC actually has this in Section 15 of the state ONE TO FOUR FAMILY RES IDENTIAL CONTRACT

One_to_Four_Family_Residential_Contract__Resale_.pdf

 

 

If a buyer then wanted to do a lease with the Seller they can do so. Then with the P&S agreement it can be assigned to the Buyer. Does this seem like a workable solution to all of the TX red-tape?

 

Obviously I am not entirely familiar with TX real estate laws and will see what an attorney says, but I thought I would get some feedback as well from the investors on the forum.

 

Thanks

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If it walks like a duck, talks like a duck...

 

Guess what... It's a duck...

 

Meaning.... it's not how you create

a slick workaround.....

 

It's how you do business in a way that

doesn't seem to be a slick workaround...

 

Slick workarounds... and judges and

free Attorneys will eat you alive....

 

Your deals need to look normal...

 

If they don't... guess what.... It still

won't hold up...

 

Of you are dead set on the Lease option route

in Texas...

 

Do a 6 month lease option and then convert it to

owner financing.... (note, deed of trust, etc..)

 

Creating paper thin workarounds that look like

workarounds aren't the solution....

 

The slicker you look in front of a judge... the worse

it is....

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One question is for John Jackson. Unless I misunderstood some of your prior posts about not being able to sandwich (sublease) in TX, can you please explain what lead you to determine that sublease is not do-able in TX? The above Section suggests otherwise.
I'm not John. I'm better looking and smarter. . .but I digress. I don't recall him saying that sandwich leases are not permitted in TX. But he'll be along later on to enlighten us, I'm sure.

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Just posted on another thread, but per TX law the seller must have fee simple title, so...on a SLO, you would be the "seller" to the end buyer, and you wouldn't have fee simple title..the original seller would..so...from that aspect, I decipher that you shouldn't do a SLO....but they never were my thing anyway....

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How can you sell a house you don't own anyway? Are you not just selling the option, even in a SLO?

 

It is confusing, especially with the Texas laws. In a SLO, if you stay in it for the long term you should be getting option $ up front, monthly difference between the rent payments, and at closing the difference between your option price and the tenant's option price. You do a double close by purchasing with your own funds or one of those 1 day money loans and then the tenant buys from you. I actually haven't done an SLO, but that is the way I understand it.

 

I can see what John is saying about the wording of the Texas law and I'm sure he's already consulted with an attorney about the legalities of an SLO. It just sucks because this really puts a damper on a wonderful technique.

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The sub2 has replaced the SLO in Texas....

Does that mean SLO's aren't' done in TX? No...but...I like to be in line with the law...unless it involves flying a Cessna Caravan across the Rio Grande with a load of naturally grown products....

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How can you sell a house you don't own anyway? Are you not just selling the option, even in a SLO?

 

It is confusing, especially with the Texas laws. In a SLO, if you stay in it for the long term you should be getting option $ up front, monthly difference between the rent payments, and at closing the difference between your option price and the tenant's option price. You do a double close by purchasing with your own funds or one of those 1 day money loans and then the tenant buys from you. I actually haven't done an SLO, but that is the way I understand it.

 

I can see what John is saying about the wording of the Texas law and I'm sure he's already consulted with an attorney about the legalities of an SLO. It just sucks because this really puts a damper on a wonderful technique.

I love SLOs. Maybe it is the power of being the Landlaord!!! ^_^ I do strongly believe in following the laws of the land. However, my comment is more of a push back to these types of government regulations that squash a legitimate business model out of existence.

 

Yes, there are those in "ALL" types of business that try and take advantage of people; but there are already plenty of laws on the books and government consumer agencies to protect the consumer. Not to mention that those who lobby for these type of laws are those who broker under the regulations of licensure only to have a monopoly of the real estate market and push out the entrepreneur. It is bull crap! Just who the hell do they think they are?

 

I have closed several SLOs and have another SLO that should be closing in the next few weeks and I don't do double closings. All these closing are completed by real estate attorneys who follow the laws. I don't take title and I don't take cash out of my pocket or do any financing. The t/b buys the house directly from the owner. I have and can receive all three profit areas of the SLO. I do not sell the house and do not represent others. I represent myself and assign/release the deal. All those in the SLO deal understand, agree and benefit when the house is sold. The government just needs to butt out.

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How can you sell a house you don't own anyway? Are you not just selling the option, even in a SLO?

 

It is confusing, especially with the Texas laws. In a SLO, if you stay in it for the long term you should be getting option $ up front, monthly difference between the rent payments, and at closing the difference between your option price and the tenant's option price. You do a double close by purchasing with your own funds or one of those 1 day money loans and then the tenant buys from you. I actually haven't done an SLO, but that is the way I understand it.

 

I can see what John is saying about the wording of the Texas law and I'm sure he's already consulted with an attorney about the legalities of an SLO. It just sucks because this really puts a damper on a wonderful technique.

I love SLOs. Maybe it is the power of being the Landlaord!!! ^_^ I do strongly believe in following the laws of the land. However, my comment is more of a push back to these types of government regulations that squash a legitimate business model out of existence.

 

Yes, there are those in "ALL" types of business that try and take advantage of people; but there are already plenty of laws on the books and government consumer agencies to protect the consumer. Not to mention that those who lobby for these type of laws are those who broker under the regulations of licensure only to have a monopoly of the real estate market and push out the entrepreneur. It is bull crap! Just who the hell do they think they are?

 

I have closed several SLOs and have another SLO that should be closing in the next few weeks and I don't do double closings. All these closing are completed by real estate attorneys who follow the laws. I don't take title and I don't take cash out of my pocket or do any financing. The t/b buys the house directly from the owner. I have and can receive all three profit areas of the SLO. I do not sell the house and do not represent others. I represent myself and assign/release the deal. All those in the SLO deal understand, agree and benefit when the house is sold. The government just needs to butt out.

 

Hi Steve,

 

So you do the SLO, by collecting an up front option fee, then monthly spread on the rent. When the tenant buyer wants to exercise their option what process do you usually do to collect the difference between your option price & the buyers? Can you outline for a scenario such as your option price is $100k and their option price is $115k

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Erik-

 

I do a release mostly. There are a lot of variables and each deal is a bit different. Check out the Release Thread pinned at the top of the Lease Purchasing Forum.

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Although I don't do SLO's, that is one way you could make the back-end, and I think RExford certainly does this from what I've read...where you just get the option and when the buyer goes to purchase from the seller, you release it and get your money on the back end.

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I'm new to this board....

and honestly... of course...

more of a fan of PURE owner financing...

(seen some bad things happen with SLO's)

 

But, just curious... what do you guys

do to protect the buyer... not just your

profit...

 

Lease options can blow up on the other end...

if you don't take some proper steps... to make

sure they don't...

 

Guess I was taught old school....

 

Because in every deal... you not only want

the least amount of liability... you also....

don't want to create a situation to where you

will inevitably get sued.... by either the buyer

or seller....

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Hey Guys,

 

Does any one on this Forum know of a good a attorny in Texas that "gets the lease option part!" I need to put this in place ASAP. I have one now in Texas that could be a great lease option.

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David, everyone may do things differently, but as for me, there is tons of CYA in the docs, but also we structure it from the get go so the buyer will be in a good position for finance, including filtering applications out by DTI, scores, public records etc. I probably turn down 70% of the applications.

There is also mortgage disclosure etc.

It's really about structuring it properly and with the finance in mind.

I think every RE avenue can have it's own quirks...just like owner finance. I've certainly seen investors get the anal shaft when the buyer filed BK right before foreclosure.

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BK.... Would effect both Lease option or owner finance...

 

What I was talking about that I havent seen talked about..

 

Is.. a performance mortgage in place to protect title...

 

I've seen alot of deals get burned on the other end..

because of that....

 

Right now... with owner financing... we are seeing down

payments in the 10 - 15% and occasionally the 20% range..

 

Plus... they are automatically set up for a refi... instead of a

purchase...

 

But, Yes... I've had BK's filed on deals... it happens about

once... out of a 150... luckily it's not common... when your collections

are tight and you have someone giving you a chunk down...

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