Real Estate Investor · Uvalde, TX · Member since 2012 · 74 posts · 6 votes
My partner and I just bought our 5th SFR since starting here in 2011. We purchased it from a bank for 42000 intending to rent it at 800/mo which is very much possible based on our other homes. We put 5000 into rehab so we're all in for 47,000.00 appx. A realtor friend of mine thinks she can sell it quickly for 75-80K, deducting her commision and closing fees we would net about 20K, which is awesome, but our ultimate goal is to have 10+ properties for retirement income later on, and this house is in a great neighborhood near schools. Passing up a 20K profit though is hard to do, we could pay another property off with that, or reinvest. Ideas?
50% rule Cap rate is 10%
50% rule cash flow is 4800/year (We paid cash)
Also was approached today by a family that wants to do a lease/purchase on it until they can sell their other home, I know nothing about this so I referred them to our real estate agent to see if that is legal/possible/beneficial??
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
12y
Sorry John, but with all the uncertainty about Dodd-Frank floating around I would strongly advise against doing rent credits of any kind.
@Trey Leigh you may still be able to do a lease option but be very careful about how you do it. Search the website for Dodd-Frank and read all the stuff that's out there about it.
Patrick, that's why I referred them to a licensed real estate agent. I've heard the ins and outs of rent to own can be complicated and we definitely want everything to be on the up and up. We still don't even know if that is something we'd be interested in, hopefully the agent can put together some scenarios for us to ponder. Another question is how would the agent get her commission for a prolonged payout scenario like lease to own, or would she?
Dodd Frank has to do with Owner Occupied Seller Financing.
If you have a lease and a separate option, no rent credits, you are not offering financing, just taking the property off the market for a set time, and giving some one time to get their DTI and Credit better.
Bottom Line - Have a RMLO look at every Tenant Buyer on a Lease with Option just to be safe.
To have the agent get paid, you could have some of the option fee to agent, and a lien on the title to have the balance of commission paid when the house sells.
Investor · North Richland Hills, TX · Member since 2011 · 789 posts · 403 votes
12y
@Trey Leigh Love the Hill Country area down there. @Brian Gibbons is a master of lease options, and I tend to be the go to guy for LO's in TX.
To be honest, the agent won't likely know a darn thing about lease options.
I've only done about 500 in the last 11 years, and my experience has shown that if you actually want the buyer to BUY the property, then a property below $90k or so in your area is better suited for an owner finance.
If the buyers are Mexican, then you need to know if they have a SS# or a TIN. Banco Popular is gone so you need to know if they can ever finance.
On this price range of house, I doubt they will be able to cash you out conventionally. You really need to know where they stand on eventual financing, which you can get them to a loan officer for that.
@Trey Leigh Love the Hill Country area down there. @Brian Gibbons is a master of lease options, and I tend to be the go to guy for LO's in TX.
To be honest, the agent won't likely know a darn thing about lease options.
I've only done about 500 in the last 11 years, and my experience has shown that if you actually want the buyer to BUY the property, then a property below $90k or so in your area is better suited for an owner finance.
If the buyers are Mexican, then you need to know if they have a SS# or a TIN. Banco Popular is gone so you need to know if they can ever finance.
On this price range of house, I doubt they will be able to cash you out conventionally. You really need to know where they stand on eventual financing, which you can get them to a loan officer for that.
You're right, she isn't familiar with lease options. We decided to list it, if it doesn't move fairly quick?y, then we may pursue the LO. If we do I'm sure I'll be reaching out to you for guidance.
@Trey Leigh Love the Hill Country area down there. @Brian Gibbons is a master of lease options, and I tend to be the go to guy for LO's in TX.
To be honest, the agent won't likely know a darn thing about lease options.
I've only done about 500 in the last 11 years, and my experience has shown that if you actually want the buyer to BUY the property, then a property below $90k or so in your area is better suited for an owner finance.
If the buyers are Mexican, then you need to know if they have a SS# or a TIN. Banco Popular is gone so you need to know if they can ever finance.
On this price range of house, I doubt they will be able to cash you out conventionally. You really need to know where they stand on eventual financing, which you can get them to a loan officer for that.
You're right, she isn't familiar with lease options. We decided to list it, if it doesn't move fairly quick?y, then we may pursue the LO. If we do I'm sure I'll be reaching out to you for guidance.
@Trey Leigh Love the Hill Country area down there. @Brian Gibbons is a master of lease options, and I tend to be the go to guy for LO's in TX.
To be honest, the agent won't likely know a darn thing about lease options.
I've only done about 500 in the last 11 years, and my experience has shown that if you actually want the buyer to BUY the property, then a property below $90k or so in your area is better suited for an owner finance.
If the buyers are Mexican, then you need to know if they have a SS# or a TIN. Banco Popular is gone so you need to know if they can ever finance.
On this price range of house, I doubt they will be able to cash you out conventionally. You really need to know where they stand on eventual financing, which you can get them to a loan officer for that.
You're right, she isn't familiar with lease options. We decided to list it, if it doesn't move fairly quick?y, then we may pursue the LO. If we do I'm sure I'll be reaching out to you for guidance.
Investor · Spring, TX · Member since 2012 · 121 posts · 26 votes
12y
Simple answer, stay focused on your goals of acquiring rental properties and increase you cash flow one house at a time. There is nothing wrong with that formula. If you need cash quickly then just sell one.
Investor · San Antonio, TX · Member since 2014 · 90 posts · 35 votes
12y
@Trey Leigh if you're looking for a bank to replace Banco Popular to finance your LO deal consider Amegy Bank if they have one Uvalde, TX. Amegy has an under the radar program here in Houston, Tx for homes loans to No SSN Undocumented Immigrants. Call them for the particulars and just as importantly call your local banks, you'll be surprised what they willing to do, overlook, to make a high interest rate loan to a good paying, money saving customer who doesn't have a SSN. Also, many mortgage loan companies, especially the creative ones like us Investors, will get your buyers through if they have a ITIN and will get them through quickly.
If we did a lease option, what is a typical option fee as a % of sales price? and is that received on top of the deposit for the lease? I assume they forfeit the option if they don't buy the house correct?
Thanks for the great info
Hi Trey,
I do MeetUp groups just for buyers who can not get financing, usually self employed or too high DTI issues.
Investor · North Richland Hills, TX · Member since 2011 · 789 posts · 403 votes
12y
@Chavel Diaz Jr Chavel, I remember you mentioning at one of the events...can't remember which one..about a lender so I'll pass this on to Rachel, and certainly talk to her when you see her June7/8 at the 2 day because this would be great info for her to look into.
Also, can you get the contact person you've used at Amegy in Houston and bring that?