Need an honest critique of my post and why I am not getting any leads or responses?

9 Replies

Hello,

I am looking for an honest critique of my post. I have what I believe is an amazing offer for truly passive income for experienced or non-experienced investors and I haven’t gotten any responses or leads. I am wondering if it is the post or the deal or me? any thoughts would be appreciated. Essentially, why would you not be interested in the deal? Or why would someone that this would work for not be interested in this deal?

http://www.biggerpockets.com/forums/517/topics/217726-118-500-property-for-sale-with-a-tenant-buyer-contract-in-place-for-139-900---3-year-term---get-in-with-20-down-around-25k-with-closing-costs

and this was my first post, I thought it was not drawing attention because of the title, but I got more views on this one then the second post above:

http://www.biggerpockets.com/forums/517/topics/216714-passive-income-producing-property-for-sale-with-equity-arizona

Thank you in advance!

I think most investors on BP are looking for tenant-buyers too, but they aren't looking to be one. What is in it for the buyer? What passive income are you promising?

Here is what the first paragraph of your post said:

FOR SALE - Passive Income. Phoenix. Wholesale price $118,500 to you, Under Contract for $139,900, Rents to the current buyer for $900 per month, Current cost for principal, interest, tax, insurance, and home warranty $665.

I can't speak for others, but that makes no sense to me.

What do you mean $118,500 to me and under contract for $139,900?  Does it mean you have it under contract for $139,900 but are somehow selling it for $20K less?

What does "Rents to current buyer for $900 per month" mean?  Does that mean it's currently renting and the buyer will have a tenant paying $900/month?  Or does that mean it *could* be rented for $900 month.

If it's currently rented, you should indicate the lease terms.  Also, consider that $900/month for $118,500 isn't going to be considered a great deal by a lot of investors around here.

You also mention the cost of PITI and home warranty -- why should P&I and home warranty matter to a buyer? Are they able to take over the financing? Are they required to pay for an ongoing home warranty?

My guess is that you're not getting much of a response because your post is very unclear as to what you're attempting to sell, and also because it doesn't sound like a great deal.

Your posts are confusing as to what you are trying to do that are in the marketplace.

For number one the purchase price is not even 1% or rents. Number two is you are mentioning skin in the game for the tenants and a 3 year contract.

If you go out longer than 1 year and a typical lease agreement you can run into all kinds of problems.

Number three if this is some kind of the tenants eventually own the property that is frowned upon a lot these days with the "Dodd Frank" rules that were put in place. Many investors do not want that liability and only finance investors now versus future owner occupants.

I don't really see how this is passive. I do commercial so zero interest in this. It seems an investor could just do this themselves with 20% down and buy their own property without this structure involved.

I am not really getting what is so great about the price, term, program, etc. 

I think most investors on BP are looking for tenant-buyers too, but they aren't looking to be one. What is in it for the buyer? What passive income are you promising?

J I think it is very confusing as well trying to figure out what they are talking about. Glad I am not the only one............. : )

Am I wrong or shouldn't this kind of post be in the Market Place  ? I mean when you get the numbers right. 

 @Nathan Weaver :

Thank you all! I see, well I am glad I asked. It seems like you are all saying the same thing, my posts are confusing.

Just to clarify…what my dad and I do and what I was trying to communicate was this:

1)We buy a property cash and rehab it 

 2)We then find a tenant who agrees to buy the property in 3 years on a Rent to Own program (in this case we have a contract with the tenant-buyer already in place for $139,900, they are currently paying $900 a month) 

3)What my post was trying to communicate is that we are looking for someone to buy the property for $118,500, if you get a conventional loan your monthly payments would be around $665 PITI or of course you could always pay cash.

4)Three years from now (at this point less than 3 years, more like 2 and a half) the tenant-buyer who is already in the house paying $900/month will purchase the house for $139,900 that the investor has purchased for $118,500.

Originally posted by @Joel Owens :

thank you Joel! I see, it seems everyone is confused with my post. I guess I am not sure how to word it, maybe I will draw a diagram.

I understand the 1% rule for rentals, but my dad and I have been doing Rent to Own’s for several years and we get buyers who intend to purchase the property. They take care of all the maintenance, we include the home warranty in the event something happens like A/C or other expensive items that way they can afford it. We have a great relationship with the home warranty company and have already seen them fix those costly A/C’s and other items.

I am not sure what problems you are referring to for leases longer than 1 year?

I agree, that is why it is nice to work with someone who has hired the attorneys and real estate professionals who comply with Dodd-Frank, most investors don’t have the time or money to do this. We have invested tens of thousands of dollars in attorneys and contracts that comply with Dodd-Frank.

You are saying that someone can do it themselves, find a deal (hardest part), find a tenant-buyer (fairly easy – yes, but time consuming), Manage themselves (fairly easy with our structure). The problem with that is that is not passive…we have already found the deal, the tenant-buyer, and manage the property. All the investor has to do is buy the property and we take care of everything else. The returns might be higher if they do it themselves, but at what cost?

Thank you for input! -John

Originally posted by @John Hyatt :

1)We buy a property cash and rehab it 

 2)We then find a tenant who agrees to buy the property in 3 years on a Rent to Own program (in this case we have a contract with the tenant-buyer already in place for $139,900, they are currently paying $900 a month) 

3)What my post was trying to communicate is that we are looking for someone to buy the property for $118,500, if you get a conventional loan your monthly payments would be around $665 PITI or of course you could always pay cash.

4)Three years from now (at this point less than 3 years, more like 2 and a half) the tenant-buyer who is already in the house paying $900/month will purchase the house for $139,900 that the investor has purchased for $118,500.

Okay, that's a much better explanation of what you're trying to do...

If you could guarantee that the buyer would close in three years at the $139,900 price, and if you could guarantee there would be no out of pocket expenses for the investor other than the $665/month during that three year period, then the IRR on this deal is about 30%. Which is great.

But, what happens when the buyer doesn't close (he can't get a loan, it doesn't appraise, he doesn't have the downpayment, etc)?  

$900 per month on a $118,500 purchase isn't a good long-term rental property.  In three years, the buyer could do some serious damage to the property (not to mention normal wear-and-tear over three years), and the investor could easily spend all the "potential equity" ($20K) on renovating the property again.

In other words, the best case scenario is great, but the most likely scenarios are all pretty bad.

I'm assuming that the house is worth $139,900 when you're done rehabbing it -- why not just find a retail buyer at that price?  If it's not worth $139,900 after rehab, you're taking advantage of your lease-purchase buyer by trying to sell them the house at an inflated price.

Overall, the idea is good in theory, but not so much in practice.  Unless you can get a large fee from the lease-purchase buyer at the time he signs the contract...and then pass that fee to the investor who's buying the property from you.  The obvious problem there is that most lease-purchase buyers don't have a lot of cash to put down.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here