First off I am older, about to turn 64. And I have had two potential opportunities "fall into my lap" that involve inherited properties that need major remodels to be able to compete in the MTR market. What I am looking for at my age, is properties that will flow in the future to fund retirement travel, and MTR is where I am headed.

But the reason for this post is I now need a structure(s) for what had been a concept. Yesterday I found out that my old neighbor who moved away to take care of her father, inherited the house next door upon his death. I spoke to her and they were going to do a light remodel (barely lipstick on a pig) and start renting the place. She also inherited a duplex. But we got to talking yesterday and I did a walk though showing them what I would do. The scope of what I would do was far beyond, and a LOT more expensive than what they were thinking. But I know it would make a good MTR, and managing it from next door would be easy peasy.

Additionally I have multiple prospects very close to my existing home that have not been remodeled since construction in the late 1970's. Three are in a in a trust, from one of my kid'e teachers. They are empty (sorta) and the new owners (inheritance)need to cash out or create cash flow. I am friendly with all the owners, and I know that I could remodel and create a cash flowing MTR in each instance. But what are some creative ways or financial structures to move toward? I want to get control of the properties, remodel and furnish, while protecting this investment.

What currently happens in my NW Austin neighborhood is older owners tend to sell their homes as is, often in need of serious remodeling. Somebody else comes in and remodels, then sells and takes the profit. Now with higher interest rates, and slower sales, the profits are being squeezed, thus an increase in risk for the potential flippers. Same model for the children that inherit the houses, rent as is, or sell it as is. While I want to make money, I am not greedy, and believe that if I can come up with the right model, I might be able to scale my MTR cash flow? While I am not afraid to invest my own time and money to renovate a property. I also can't financially float three or four $400-600K conventional loans. The owners who need to remodel to get top dollar have the opposite problem. Inherited house, without the $50-60K to remodel. I am trying to find a way to make this dichotomy work where both parties can profit. But I must fully protect my investment of time and money. I guess the odd part (to me) is I am putting up the money for the renovation, potentially without full ownership of the property. Which is risky. But here are some of my structural ideas after thinking about it yesterday.

What should I propose to my neighbor? Ideas, thoughts and especially criticism welcomed!

1) lease to own - Basically arbitrage model but use option to protect investment. Negotiate longer lease period with purchase option. Though I am unsure how I would amortize the up front remodeling costs for P&L, tax accounting.

2) Interest only loans term loans - Would allow current owner to have cash flow on the property, without eroding the asset value. Low out of pocket cost. I have a distressed condo I was going propose this idea to a Trust that owns the condo.

3) ** Interest only loan at a reduced rate - and create a vehicle for them to also benefit from the MTR model? If I could come up with the right model here it might be scaleable? The additional MTR profit could be returned to owner and trigger beneficial conditional clauses in the loan contracts? Purchase option, reduced purchase option price, conversion of loan to fixed rate.

4) Some sort of partnership? Where I recover my investment in remodeling/ furnishing the place property, at a faster rate than the owner? The key with any partnership is well defined entrance and exit rules. For example what if I found a house that did not need much more than paint and a brush up. Could I just come in do the brush up and furnish on my own dime, and partner with them to split the profits?

Anyhow Thank You! If you have read my diatribe this far. But to in the end I am trying to not have to own the properties outright in the beginning to allow my dollars to be put into renovation and furnishing. I am trying to find an alternative model I might present to folks I know that inherit properties beyond the traditional sell it, or LTR it, without renovation for less money?

Or am I an idiot? ;-)

PS- anything proposed above pushing me into "property management" where I would need a RE license? I would think my investment would preclude this, but thought I would ask.

Austin, Texas

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