All Forum Posts by: Fred Engh

I'm not going to address you obtaining a primary residence loan and renting it out as @Jon Holdman has hit the nail on the head with that. 

Why do a lease option? Money. 

You need to compensate for the added risk (of losing a rental). 

If the market price is $1,000 (you didn't specific so I made up a number) and you can do a lease option for $1,200 then you are being compensated $200 over market. 

If the value of the house is $120k and you do a lease option at $130k, you are coming out ahead $10k if they actually buy. 

I agree that there are predatory lenders doing this, but it doesn't mean you can't make added profit by giving the option, just compensate yourself for the option.

And yes, you also have backdoor equity on the default or them not following through on the sale.

Many people aren't in the financial position for traditional bank financing. Lease options give them A PATH to home ownership. It's up to them if it is the correct path. 

You're going to pay the electric bill?! Are they not sub-metered?

I agree with @Lucinda Toope that you want to watch the data. It's not a big deal, but you may want to look at sharing internet for commercial purposes (depriving the internet company from 5 separate bills). 

What is the significance of your family living 2 hours away? Are they willing to manage it? You didn't really elaborate. Are they willing to show the units? 

Have you done a calculator for all of your utility costs? They are a free source on BP. You might be surprised at how much they eat into your profit. 

If you're going to use PM then I would get more than one quote and screen/vet several. You really need to see what they do and don't do for their fee. How much are they going to charge you to screen tenants?  How much do they charge for lease renewal? Some charge $30 an hour just to meet a contractor who then subs it out. You could end up paying 2 people to "oversee" the guy who is actually doing the job. 12% is north of par, but maybe they're doing other stuff for free. 

For tenants:

https://www.biggerpockets.com/renewsblog/2013/01/2...

I liked the detail!

Are you able to be reimbursed for your first day costs? 

When the wholesaler produced a fake id from someone that was clearly fraud. Did they end up with  money?

Was the legitimate seller involved in the process or did he forge the signatures? Can you buy the properties directly from the seller?

Great insights on a bad situation. Thank you for sharing. 

A non profit just got me up along if I wanted to DONATE land I had for sale.  PM if you want their info. A tax write off to boot.

@Matt A. I agree with everything you said, except getting rid of the tenant. Even when his girlfriend moved out, he still came up with the rent every month. 

Having them sign another 1 year lease is clever and not a bad idea. Another solution would be adding them onto the lease, m2m. The college situation seems slightly different as the tenant is actually moving out. In this situation they're roommates. 

The question to ask is: why would you NOT allow him to add a roommate? He pays the rent every month (early you said) and is being proactive to ensure he can continue to pay his rent. 

@Jon Allen I agree with coming to a civil compromise before it gets messy. Your agreement with her allows you to terminate the lease 60 days after the say. Your sales agreement with the buyer doesn't have to include that. 

Did she pay January's rent? 

Yes, you have the legal right to enter with 48 hour notice and any buyer is going to want to view before making an offer. I would try more honey than vinegar in trying to keep the peace before serving official demands and going that route. Yes, it is an option, but I personally would wait before pushing the envelope. 

I like that clause in the lease. I'll have to remember that. 

If your loan requires you to have a 1 year lease, but you're selling it, isn't it a moot point if you switch to month-to-month (barring your sale falling through AND she moves out quickly)?

The numbers look good. Don't overthink the numbers, focus on the details itself. Capex is low, but given it's just been rehabbed 2% is feasible.

One question - you can find property management for $60 a month? Did you factor in their move in costs? Don't expect much for $60.

On another note, be careful using the term non-refundable deposit. I know in Washington there is no such term.

The difference between a deposit and a fee is that one is refundable and the other is not. A deposit is an amount of money that a tenant must pay before or at the time he/she moves in. The deposit is often refunded at the end of the rental period IF it was not used to compensate the landlord for damage or repairs.

I agree with others that I'd look for another reason to decline. I would look into service animals and emotional support animals. I know in Washington they're cracking down on people taking advantage of that.

You should seriously consider doing a full write up for us to learn from.

How did you learn about the property?

Who contacted you?

What were the terms of the deal?

What transpired?

Did you have any red flags?

How was the title company defrauded? What mistakes did they make? 

Do you have a takeaway from this? It sounds like you're receiving your money back, but it's still unfortunate you wasted your time on this. 

Did the title company pay the fraudulent seller? Did they actually incur a lost?

*In my mind I thought you asked about manufactured home, not multi-family.