All Forum Posts by: Brooks Rembert

Hi Mark, we try to treat our tenants as valued clients and be responsive to their requests, within reason. We also use technology to make paying rent easier and we also report their on time payments to the credit bureaus to help build their credit for future home ownership should they choos to go that route.

Marcin, until this year, I always used TurboTax. We now have two rentals, so I decided to bite the bullet and go to a CPA.

TurboTax is fine. It's fairly dummy proof and will walk you through most of what you need to know. With good records, it should be good for now.

Benjamin, the first step is to check on the requirements for Florida. Here in Virginia, you must have a Broker's license, so short of partnering with someone, it isn't something that can be started quickly at all.

Yikes. The joys of landlording. We've been very fortunate with our tenants these past three years. Hopefully 2015 will be more of the same.

Yikes, as a newb, I didn't realize I was in fraud territory. Just an idea that popped in my head at 3:30 AM after being awoken by a screaming 5 month old. I obviously have much to learn. 

I've heard of folks buying houses from sellers who've fallen behind on their payments, then leasing the house back to them to avoid the pain of moving, etc, but another idea came to me, which I'm positive is not an original thought. I know the experts here on BP will be able to tell me if I'm smoking some funny stuff.

The idea is; why not do a lease option for these very same sellers?

I would envision the deal going something like this:

Identify sellers at risk of foreclosure. Maybe they've gotten a month or two behind, gotten some nasty letter from the bank etc. To use round numbers, let's say they owe $100,000 and their original mortgage was worth $160,000.

Let's say the PITI on their loan is approximately $875, plus or minus $50 per month.

The buyer could come in and offer them $120,000 for their home. That would pay off their mortgage and leave them with $20,000. 

At closing, the seller would immediately sign a lease option with a $10,000 option payment to buy the house back from you in one or two years for $130000. Their lease during that time is, say, $800 per month, saving them about $75 per month.

They get to stay in their home, pay rent totaling $9,600 for the year, then buy the home back for $130,000, with the $10,000 option payment applied to purchase, meaning they are essentially buying it back for $120000; what you bought if for.

Financials

$120,000 with 20% down equals PITI of about $720 per month. Cash flow from rent of about $80 per month, or rounded up to about $1,000 that first year.

That $1,000 plus your $10,000 option payment equals $11,000 on a cash outlay on your part of $24,000 (20% down on $120,000) plus say two months of catch up with the bank equaling about $1,800 for a total return of $11,000 on $25,800.

By my math, that equals a return of 42.6%

Is this legal? Does it make sense? Am I missing something? 

I'm looking forward to your comments...

It looks pretty robust, but until I scale up a little larger, free is fine with me.

I have the same issues when I buy homes. Residential lenders usually will only let you title the property in your personal name. Once the deed is recorded, the lawyer at the title company can then prepare the deed in the LLC's name.

It was frustrating at first, but that is the way most residential lenders play the game.

Same here. I've read the book and thought it was VERY informative. I'm trying to replicate his model, minus the Section 8 aspect; I've heard horror stories from friends with personal experience.

I highly recommend the book. Like you've heard a thousand times here, you make your money on the purchase, so buy as low as possible to allow you to rent it for a fair amount and still be cash flow positive after you refi and pull cash out of the house.

We're under contract for our second house now and hope to refi in the summer to roll into another.

We've always just charged one month's rent, but up in Northern Virginia, where that home is located, that's over $2,000 which is usually plenty to touch up some paint, clean the carpets, etc.