Apr 26 '09, 09:31 AMI have some free videos on Rent to Own Consulting...
This is where you as a REI:
- Find Houses that are in good school districts, modest 3-4 bedrooms, fenced in yards, internal garages, good bus service
- This can even work with $300K - $400K houses, but $100K to $250 work the best
- Current financing must be fixed, not ARMs
- Seller does not have to be HIGHLY motivated, and must be willing to turn their home into an investment property for 36 months
- The average deal is market rent plus another 30% in top of that (this is a separate payment) treated as an option payment (tax deferred vs taxable with rent payments)
- Not good in TX (any where Lease Options are frowned upon)
- The biggest objection is HOW CAN I GO BUY ANTHER HOUSE? When applying for the new mortgage, the lender only wants to know TOTAL CACHFLOW. in this case the total cash flow is MARKET RENT plus 30% more.
You make money with the 3% fee by-
1. Acting as a Principal entering into a Lease and an Option to Purchase
2. Having permission to sell the contract and market the property - show the property
3. Sell - Assign the deal for 3 - 5%
The Tenant Buyer is at risk of not getting qualified because banks aren't lending. I advise NO RISK Lease Options where the Tenant Buyer gets all option money credited toward a new private mortgage for 3 year term AFTER COMPLETING A 36 month long lease.
The form of this new Private financing can be an Agreement for Deed - Land Contract or Wrap AITD depending on your state.
In this housing market, you can tie the house sale exercise price to a NEW APPRAISAL AT TIME OF EXERCISING. The lender will appreciate that the house is a current value, the TBer will feel that he has an honest deal, and chances are, in three years the market will have corrected itself to somewhat of a fair home price level, so the seller might get a more attractive sales price.
PM me for the free video.
Best of luck to all,
Brian
PS Feel free to critique the above, as I always looks for new and well thought out ideas!
