All Forum Posts by: Jeff Rabinowitz

@Manny Rodriguez, 18% annual interest would be $100 for 2 days on a $100K loan. I find it hard to believe that a transactional lender would lend at such a low rate. Are you sure there aren't a pile of fees associated with this? I have seen rates of 2% for the transaction ($2K for $100K) quoted frequently. Sometimes the rates will be a lower % but with a minimum charge. It isn't inexpensive but if you need the funds in order to do the deal and it puts money in your pocket there is a time and a place for this tool.

@Sue Bladek, are you sure you entered all expenses: taxes, insurance, maintenance, and vacancy? Maybe the seller is saying the tenant is stable and is happy with the house in its current condition but you need to verify. Every tenant moves, stops paying rent, or dies eventually. How long will it take to rent a rural house? Is there strong demand? Also, all homes need maintenance. As I'm sure you know a 30 yr. roof lasts ~15-20 yrs. (if you're lucky) in Michigan.

You can run a rental home in a SD IRA but it can be cumbersome. All bills must be paid through the IRA--there is a delay. Also, you must be very careful that you don't add value to the home personally or you may run afoul of the self dealing penalties--they are severe. Will you be managing the property yourself or hiring a property manager? There are those who say you can manage yourself and stay within the IRS guidelines but there are those that say this can get you close to a self dealing violation. The worst part is that the IRS changes their own interpretation fairly frequently. That which they allow today may be considered a violation tomorrow.

Lease options can be done (I did one years ago.) It is possible to get some more rent but the "way more" bothers me. If you are taking advantage of people you may have a price to pay down the road. It is permissible to collect an option fee upon leasing the home but again, if the fee is too large you may find yourself in court. If the option fee is close to what a security deposit would be you are probably fine but if it is multiples of what a security deposit would be you may find that a judge would consider that you financed that house, your tenant is really a buyer and that you violated provisions of Dodd-Frank and the SAFE Act. I am not an attorney. It may be wise for you to speak with one before going too far.

As far as not having 10K around...a lot of people have large sums of money. If they didn't make their mortgage payment for a year or more and were foreclosed on they would not qualify for a mortgage but if they were prudent with their money they could (and many do) have a substantial amount saved.

Welcome to BP. Anyone with money can become a private lender. Share your story and your plan with everyone you meet. There are quite a few members of this site who are lenders. Lenders, or potential lenders, also attend Real Estate Investment Association meetings. Do a search for some in your area. Attend and when you do make sure you meet people. 

Manish, fill out your profile. Sharing information about yourself helps other members know your experience and makes it easier to answer appropriately. While you're there upload a photo. You will get more responses if we can see you.

Your knowledge of the market is key. Also, your experience/skill level and that of your partners and, of course, your access to capital. New construction requires significant resources be put at risk. Construction delays and cost over runs can easily turn your "investment" into a loser.

@Johnna Lodge, thanks. This is my nicest appointed home but it is a bit odd. It has 3 br, only 1 bath and no basement. It sometimes takes a little while to find the right tenant but I have never had anyone stay only 1 year. Even this tenant will has been there over a year but that is because they moved in the Winter and I usually stretch my Winter leases to the Spring. I find it easier to find tenants at top rent in the Spring/Summer.

@Brendan Spaar, I think you are right that they like to complain to feel in control. I don't need to have a reason to not renew in MIchigan. The expiration of the lease is enough.

@Sante R., it seems like your situation is worse than mine. I've been a landlord for a while and my tenant is really a bit humorous (especially since this is one that I have under management) but it is not funny enough that I want an extended run of the show.

@Marci Stein, thanks. I agree.

You could do this but it will only work if the seller is ready to sell. If he isn't the condition of the property is irrelevant and besides, October is a long way away. The property may look significantly different by then. I wouldn't bother with the inspection until Julian is certain the seller is ready to sell. If he keeps in touch he will know when the time is right.

@Mark Caragio, welcome to BP. This is a social networking site. Fill out your profile and upload a photo (yours can't be any worse than mine). It will encourage other members to reach out to you. It is easier to tailor a good response if we know something about you.

That said, I recently faced a similar problem on my first new construction home. I was also in a hot market. The plan was to list early and try to catch a buyer so we could use their down payment, save expense, save anxiety, blah, blah... I can tell you know what I'm talking about. We were monitoring the market very closely and we saw price increases on new construction weekly. Not only that but our house compared very favorably to what was on the market. The prices were rising fast enough that we thought we might actually short change ourselves if we listed early. We decided to wait until the home was completed before listing and we caught a buyer in a couple weeks at a price 15% above what we were planning to pre-list for. So how confident are you that yours is a hot market and that your house will compare well to the comps?

I see on your profile that you haven't done any deals yet and you are thinking having a co worker for a tenant might be a good first deal. This reminds me of a situation I had when my daughter went to college. She was thinking it might be a good idea if I bought a house for her to rent while she was going to school. (It actually was a good idea. I know a guy who (whose father) earned enough to cover his tuition by renting a house and selling it after he graduated.) The problem with my daughter's proposal was she wanted her boyfriend to live there. I thought that was a terrible idea and not just because I didn't like him. The question I asked my daughter was: "Could you evict your boyfriend?" She was taken off guard and told me several reasons why that would never happen so I asked my question again. She finally admitted that no, she couldn't. I ask you: could you evict your co-worker? If your answer is no you shouldn't even consider this.

Send her whatever you have. She is telling you she is not comfortable with you. It is your job to make her comfortable. If you don't you can forget about getting her to sign a contract. In fact, she may not even open the door when you get there.