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<Steve>

Tenant's A/C

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Hey Guys-

 

I have a SLO that I’ve had for several years. Get along great with the seller and I take care of the house like it’s mine. Last week with the hot weather coming the central air conditioning went out. And there is nothing worse than a now mad tenant sitting in a hot house. The tenant also wailing about ants, and as tenants do, they exaggerate any repair issue. So I sprayed and found termite damage too. So with this, I had to bring in the Seller for the cost of repairs.

 

Long story short after a long week the A/C repair $1,861. Termites $800. A Visa moment for the seller I’m sure.

 

This week I am just getting over the tenant’s rants and the tenant calls and says the A/C is not working again. !@#$%^! So, I’m having the seller call back the service tech.

 

Tenant calls me back and says he wants a face-to-face, 1-on-1 conversation in person. I ask what’s the issue(s) and he refuses to say, but still wants to talk in person. hmmm Should I stay or should I go? :huh:

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I'd probably opt to meet with the tenant to defuse the issue(s) now, rather than have this linger. Nothing worse than an angry tenant who views you as the source of his anger. I'd rather grease the squeaky wheel than have it chirping in the background for weeks on end.

Of course, this is all contingent on the tenant being reasonable with his demands and complaints, and being a good tenant, meaning timely rent payments and holding up his end of the terms.

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All I can say is setting up a Lease Purchase correctly with good agreements that I can fall back on is 'muy-importante'

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Muy bien, Stephano. Now the issue is behind you and everyone can relax and move on with more important matters. . .like, when will the Panthers realize that Cam Newton ain't the answer? :P

 

 

 

 

 

 

 

 

Go Big Blue!

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Steve, Just wondering what kind of terms you try to get when doing a Sand/LO. How many years and such. How much maintenance expense are you willing to take care of in a three or five year term. Also, do you have a clause in your contracts stating that if something big comes up, such as a septic system failing and the owner simply doesn't have the funds to spring for this, that you will pay for it and then be reimbursed from the sale proceeds on the back end when the deal closes.

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Hey Mike-

 

SLOs are my favorite lease purchase technique. I like to offer a 3 year term with a SLO. I start with a 1 year term with the right to extend. I have properties that end up going longer, and I will take a 2 year if I have to. I like to have a 20% spread between what I pay the seller in rent and what I receive from the t/b. For price my minimum equity is being able to offer a 100% rent credit and still have some back end. For repairs I offer $250. per incident then it goes to the seller. This typically takes care of most repairs. I do not take on the responsibility if something big comes up, but everything is negotiable.

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Steve, when sign a sandwich L/O with the seller do you record a "Deed of trust to secure performance of Option" document as well as a memorandum of option.

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When you say deed of trust are you meaning a Performance Mortgage? Definitely stronger with more protection than a memorandum, but I will typically just do a memorandum. Not a bad idea to use it, but as you say, I would combine with a memorandum to meet state regulations.

 

Mike, where in NC are you located if you don't mind saying?

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I live in Wilson. About an hour east of Raleigh. The reason I was asking about the deed of trust is because I was talking with an attorney yesterday, trying to get some documents in place and I showed him this deed of trust doc that another investor gave me. It's basically just a regular deed of trust that you would see with most mortgages. The only difference is that it's got one paragraph at the beginning that references the option. The wording states to the effect that where ever you see the word "note" replace it with the word "option" and where you see the word "loan" replace it with the word "option fee" The attorney had never seen that wording in a deed of trust doc and said he thought you would have a hard time getting a judge to let you foreclose on someone using that DOT document.

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Well, to keep it simple and MC can correct me, my understanding is that a mortgage secures the note, and the Deed of Trust brings in a third party as a beneficiary should the mortgage default or until the note is paid off. The reality is the so called home owner paying the mortgage only owns the house for a couple of minutes between signing/recording the deed and then signing/recording the deed of trust, in that order. When the deed of trust is recorded the beneficiary in the trust really owns the property. A mortgage can secure the performance of many things like an option too.

 

Anyway, the Naked Investor has a Performance Mortgage that can be used to secure the performance of the option with the seller. I haven't looked at it for a while until you brought it up. It is really good and I may start using it with SLOs, if anything to make sure that a General Warranty Deed can be delivered clean at close.

 

Doesn't seem like a good idea to just change a word in another document and feel that your are good to go. With a Performance Mortgage you should not need to foreclose because the deed has not transferred. However, a recorded Quit Claim Deed maybe needed to extinguish any interest the investor has in the property.

 

I am just going off memory at the moment and did not take the time to look all this up so don't hang on every word. But that is my gist.

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You are correct that the Performance Mortgage can be used to "secure the performance of the option with the seller". Problem is, getting a homeowner to agree to sign that document can prove to be quite difficult. Most won't understand what it is you are asking them to sign, and that means they get an attorney involved. Once that happens, the deal is dead.

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