All Forum Posts by: Dylan Hall

Hi everyone,

I've been thinking through an idea that likely has many issues, but I am hoping to get feedback on if you have time and are intrigued. If the idea proves desirable, I am interested in trying to create a business from it, but am still investigating if it is feasible.

Also, any recommendations on people to speak with would be helpful as well.

Problem: Even though there has been an increase in rentals, most people still express a desire to own a home. The control associated with ownership is very attractive to most. A house as an asset is a secondary consideration for some, but still attractive as well. The most recent recession has left people in negative equity situations (currently about 25%) and younger generations have higher debt burdens from student loans, which may make people more averse to debt to finance home purchase.

People want to invest in residential real estate, but it can be a difficult management problem and creates a lot of risk for investors.

Possible Solution: Imagine there is a company that establishes a limited partnership arrangement with prospective homeowners. The homeowner would be the General Partner and oversee the management of the housing while living there. The homeowner would pay rents to the investor company, and acquire ownership (say 5%) every year. However, the company would remain a passive investor throughout and always maintain some ownership in the property. Also, the limited partnership would have shares that could be sold to other investors. The rents collected would effectively be dividends.

Known issues:

Homeowner as investor: If the homeowner has built up 25% ownership and wants to leave the house, do they have to be bought out? Or do they just become a passive investor? Would this scare homeowners since homes are sometimes illiquid?

Handling Repairs: I believe the homeowner could be compensated either by reducing rent and/or by providing additional equity for the repairs that were made.

Passive investor rights: Ability to refuse unneeded repairs or at least not pay and prevent homeowner from selling house without consent.

Monitoring house: The home would be appraised/inspect periodically. Rents and the price of "buying ownership" would be updated to reflect new home price.

Again, any feedback would be helpful, even if it's, "you're on the wrong track and here's why."

Thank you,
Dylan

Tom Goans & Paul Timmins

Thank you both for your great advice. Sounds like you've definitely made living a lot easier for a lot of tenants. Having rented my entire life, I wish can easily say that there should be more landlords like you.

Tom Goans

Thank you for your thoughts. It is really encouraging to hear that you have had success lending to a variety of people and place importance on affordability and not stretching budgets to the last penny. I bet if more people took your approach, real estate would be a better market for those involved.

Have you in a previous post talked about how you approach assessing a good person to do a deal with, determining their level of affordability or how you approach investing with people in general? That would be helpful for a beginner like myself, to hear some of your basic guidelines.

As far as blame, I think at the end of the day, blame goes both ways, and I do not mean advocate one party is more to blame. Some banks gave money for referrals to help draw lower quality borrowers, and were not too concerned about the quality of loans because they could just sell them to other banks 3 months later. This is a lot different from the days of savings and loans like George Bailey's. On the other hand, a lot of borrowers were buying up multiple properties and not exhibiting any form of caution, hoping to make an easy buck. I'm sure you already know this and have a deeper understanding than myself.

Again, thanks for the post. I can already see that joining Bigger Pockets was a good decision.

Dylan

Tom Goans - thank you for your sharing your thoughts. It's clear I have a lot to learn from you. As a former high school math teacher, I can understand the importance of educating consumers that you describe. Since I worked in a low-income neighborhood, I've also seen the effects of subprime lending, situations where lenders look to profit from that very lack of education. So I hope to find a better way of financing that prevents misuses of credit from both parties.

Mehran Kamari - thanks for the message. Hope to stay in touch and keep abreast of your insights.

Thank you. Appreciate the support from a fellow Chicagoan.

Hi everyone,

My name is Dylan Hall, and I recently joined Bigger Pockets. I hail from Chicago, IL and am interested in finding new ways to finance housing in the United States. I recently graduated from the University of Chicago, where I have been helping a former professor who researches housing's impact on the larger economy and believes we should consider reform in the housing finance market.

I have started a blog to document my search.

Even though real estate is somewhat new to me, I don't think I could ask for a more active, experienced and helpful community to join.

Thank you,
Dylan