All Forum Posts by: Mike Lowery

@John Jackson I understand where you are coming from.  A few things to consider. I am currently living in Texas and the home is in WI. The house has been sitting on the market for four months. If I could get someone in now at a fair price, wouldnt that be better than going into the winter months with it still on the market? I understand I could make the option price higher, not give concessions, make everything non-refundable, but where the house is priced right now, I stand to gain about $6K from the sale at $112K. If I can get this lease option deal done with this acquaintance then I stand to gain about $12-$20K at the end of the term, while freeing up the money I am currently paying for a monthly mortgage. This was never purchased as an investment property. It was not purchased knowing what I know now about real estate and quite honestly its essentially been a long term flip. Now I am looking at ways to get a sale done and at least make a little bit of money. 

Hello BP!

I am looking to sell my residence in Milwaukee, WI due to a job relocation. The property has been on the market for approximately 4 months with a starting sales price of $129,900. There was a sale one month prior to listing of an identical house two doors down for $130,000. That house was better updated cosmetically, but my home has newer furnace, A/C, hot water heater, sump pump and drain tile (one of the few homes in the neighborhood with a sump pump). I just lowered the price to $112,000 today to get it sold and I was inquired about the possibility of renting it. Due to some other personal manners, I would really like to sell the house, so I asked the potential renter if they would be interested in a lease option. They said they would so I am here to ask if my numbers sound right. 

Purchase Price - $115,000 (Is this alright since the house is reduced to $112,000? I am assuming some appreciation during the term of the lease)

Option Term - 2 or 3 Years

Mortgage Balance as of today (~$89,500)

Current Monthly P&I and PMI - $782.10

Current Yearly Insurance - ~$700

Option Fee - $1,000 (due at signing of the contract and held in escrow to be given to seller when option come due)

Monthly Payment - $1,200 ($200 of which would be set in escrow and given to seller when option comes due)

Total Cash Flow Monthly to Seller ~ $85

Buyer would have either $5,800 (2 yr.) or $8,200 (3 yr.) at time option is due which would cover at minimum a 3.5% down payment for a 2 yr. option and a 5% down payment for a 3 yr. option. 

If Buyer chooses not to purchase the property at the end of the term, they would forfeit the option fee, but be refunded half of the money in escrow. This is a person I went to college with so I figured I would not keep all of the money held in escrow. 

Obviously this would net me more money in the future and I would also be using someone else's money to pay down my mortgage. Speaking of which, I would set in the contract that the money taken from the buyer would be paid directly to the mortgage, so they can rest assure that I am current on the mortgage during the term of the contract.

How does this look to you? Does anyone have experience with these types of deals? Who is responsible for maintenance on the property during the option term? Anything I am forgetting?

Any help would be greatly appreciated. Thank you for your time. Cheers!

Hello BP!

I am interested in exploring more of the options for receiving financing through a joint venture with a Self-directed IRA. I think this is a really great way to find and attract capital to your business, while creating cash flow and helping other achieve their retirement goals. I understand the majority of the logic behind it, however, I am getting hung up on one thing. From what I have read is the investor (catalyst) will go out find and manage the deal from start to finish while the partner will finance the flip, rental, etc. through their Self-Directed IRA. If you do a 50/50 JV agreement, the cash flow, initial investment and gain from the property much flow back into the IRA, correct? If so, does the cash flow and gain flow to the investor (catalyst) as cash? Is this something that you spell out in the JV agreement?

Secondly, If you have a person IRA, can you change that to a Self-Directed IRA and invest in a rental property that you are also living in?

Any help would be greatly appreciated!

@Erica Villarreal Thank you for the invite, unfortunately I will be on shift tomorrow. Please keep me updated as to future events. 

Hello BP!

I am new to the Houston area and am interested in finding out and attending any meet and greets or REI meet-ups in the area. My main focus is to analyze and find my target market, create a strategy to flip properties, then add some buy and hold properties to my portfolio. Given my employment, I have plenty of free time to be of assistance to a seasoned investor who needs someone to do the 'grunt' work and exchange will provide insight to the local market, leadership and guidance. I look forward to meeting you!

@Dawn Anastasi - I think that the selling price would be a reasonable one for both myself and the buyer given the three year 'rent' period. I dont think I am giving up that much risk, but I am also not sure that I could get that much for it this summer. I would think more in the $115-$120,000 range.

The biggest concern I have is if I sell the property, I want to get everything done and try to sell it for top dollar. The chances of that are slim to none as I will probably be looking to rent or sell within the next 90 days. So the question is do I sell it for less or try to rent it out until I can get the work done that I would like to. Both my wife and I would prefer to get rid of it, but I just am unsure of what price we will attract, especially with a lot of similar properties in Bay View currently on the market.

Has anyone in the Milwaukee area did a rent to own contract? I will most likely be relocating and I am not sure if selling my house outright or rent to own would be the best way for me to go. Looking for some insight to see how other people's experiences with rent to own in this market.

My proposed figures would probably look something like this:

$126,000 Sale Price w/3 yr rent to own

$1260 monthly rent with $300 allocated in escrow and going towards buyers down payment

$1260 Security Deposit/Option fee

Buyer responsible for all maintainence and repairs on the property.

Oh and to cover some of the other questions posed, I would probably be shooting to be in Houston by the first of June at the earliest and first of August at the latest. Obviously if I could hold off until August that would give me some more time to figure things out.

I have thought about the points mentioned above. My family would more than likely rent when first move down to Houston. There is no sense in trying to purchase a home down there without knowing exactly where we want to live, schools, commute, etc.

I dont think I would qualify for a mortgage with a property still listed for sale in Milwaukee, however, I dont expect that will be an issue until I start looking to buy a house in Houston, at which point I (hopefully) would have sold the house in Milwaukee, or have a years worth of rental income from it.

Lastly, there is no way I could afford to live in Houston and have a home in Milwaukee unless I rented it out. The decision to sell, or rent will have to be made prior to my family leaving the area. Anything over a 3 month window where we would be paying a mortgage and rent without selling or receiving rent is too big a financial burden to carrry.

When all is said and done, I really dont want this to be the deciding factor on whether or not we move, but its looking like it very well could be.

I am sure the numbers would work to rent it out, but being so far away, I would rather just get rid of it and be done with it That was something else that I was contemplating though Essentially renting it out for a few years, taking care of the work that needs to be done and then selling it in a more realistic time frame.