All Forum Posts by: KC Pake

Quote from @Bradley Buxton:

Has anyone leased to own from the leasing side or the seller side?  What are the advantages for both sides and what are the disadvantages? 

Is this a good strategy to get started in Real Estate investing on a first property? 

Are there standard contracts or would a lawyer be needed to write something up?

Hi Bradley,

Your inquiry about lease-to-own agreements from both the lessee (buyer) and lessor (seller) perspectives is a great question, especially in the context of real estate investing.  I only have experience from the seller side.  Below are some thoughts on this topic.

Advantages for the Lessee/Buyer:

- Lower Initial Investment: Lease-to-own often requires a smaller upfront payment compared to buying a property outright.
- Test Drive: It allows the lessee to "test" the property before fully committing to the purchase.
- Building Equity: Part of the lease payment typically goes towards the purchase price, and building equity in the property.
- Credit Score Improvement: It can provide time to improve one’s credit score for a more favorable mortgage rate in the future.

Disadvantages for the Lessee/Buyer:

- Higher Overall Cost: The total cost might be higher than purchasing outright due to lease premiums.
- Risk of Losing Investment: If the buyer decides not to purchase, they might lose the extra money paid towards the purchase.
- Property Value Fluctuation: If the property value decreases, the buyer might be locked into an overvalued price.

Advantages for the Lessor/Seller:

- Steady Income Stream: Regular lease payments ensure a steady income.
- Higher Sale Price: Sellers can often negotiate a higher sale price compared to a traditional sale.
- Attracting Buyers: It opens up the market to buyers who might not qualify for traditional financing.

Disadvantages for the Lessor/Seller:

- Delayed Sale: The full sale of the property is delayed until the lease term ends.
- Maintenance Responsibilities: The seller might still be responsible for major repairs during the lease period.
- Market Risk: If the market appreciates significantly, the seller is locked into a predetermined sale price.

Regarding whether it's a good strategy for getting started in real estate investing, lease-to-own can be a viable option, especially for those with limited initial capital or for those wanting to enter the market without immediately committing to a mortgage. However, it's important to weigh the potential risks and benefits carefully.

As for contracts, while there are standard templates available, it's highly recommended to consult with a real estate lawyer to tailor the agreement to your specific situation. Real estate laws vary by location, and a lawyer can ensure that the contract complies with local regulations and adequately protects your interests.

Hope this helps!

KC

Quote from @Nadine Kwiatkowski:

Thanks for your quick response! I fully anticipate some back and forth and understand Fannie having a threshold they are not willing to go below.  I just was thrown by their second counter coming in at a higher price than their original counter by 11k.

Nadine,

The situation you're describing, where the second counteroffer was higher than the first, is unusual but not unheard of in real estate negotiations, especially with large entities like Fannie Mae.

Here are a few possible explanations for this:

1. Changing Market Conditions: If the local real estate market is heating up, Fannie Mae might adjust their expectations upwards. They may believe that they can get a better price if they wait, especially if other similar properties in the area are selling for more.
2. 
   Internal Reassessment: Fannie Mae might have reassessed the property's value based on new information or a reevaluation of the market.
3. 
   Negotiation Tactics: It could be a negotiation tactic. By raising the counteroffer, they might be trying to see if you're willing to increase your offer. This can sometimes happen when a seller perceives a buyer as very interested and capable of paying more.
4. 
   Administrative or Human Error: While less common, there's always a possibility of an error in the counteroffer process.

In response to this, you might consider the following:

• Re-evaluate Your Offer: Ensure that your offer is still in line with the market. If the market is indeed heating up, it might be worth considering if an increase in your offer is justified.
• 
  Communicate Your Position: If you decide to stick with your current offer, communicate clearly why you believe it's fair. If you have data or comparables to support your stance, present them.
• 
  Flexibility: Decide how flexible you are willing to be and at what point you might walk away from the deal. It's important to balance determination with practicality.
• 
  Seek Clarification: You or your agent could directly inquire about the rationale behind the increased counteroffer. This might provide you with more insight into Fannie Mae's strategy and help you decide your next move.

Remember, every negotiation is a learning experience. Stay informed, patient, and flexible, and continue to seek advice as needed. Best of luck!

Quote from @Nadine Kwiatkowski:

Hi all, 

First time home buyer with a question on Fannie Homepath purchases. I recently put an offer on a home that had a recent price adjustment. I still felt it was priced too high compared to similar houses in the area. 

I offered about 30K less than the reduced price and they countered about 15K more than my offer. I held firm and it was rejected. I submitted another offer at 20K less and they now counters with 16K more than that. Is there any reasoning for this? I've stayed firm again at my 20K less than listing and anticipate another rejection. 

Is Fannie playing around? I'm considering waiting a few more days and putting in my original offer again. If anyone has any input or experience it would be appreciated. This would be an owner occupied home for me.

Thanks in advance!

Hi Nadine,

Navigating your first home purchase, especially with a Fannie Mae HomePath property, can be challenging. Your experience with the back-and-forth on offers and counters is not unusual in real estate transactions, especially when it comes to properties managed by large entities like Fannie Mae.

Here are a few points to consider:

1. Market Analysis: Ensure that your offer is in line with the current market value of similar properties in the area. If you've done your research and your offer reflects the local market, you're in a strong position.
2. 
   Fannie Mae's Strategy: Fannie Mae, like any seller, aims to get the best possible price for their properties. They might be countering your offers based on their assessment of the property's value or their internal guidelines for selling properties.
3. 
   Negotiation Room: It's common for there to be some negotiation. The counteroffers you're receiving suggest there is room for negotiation, but Fannie Mae might have a threshold below which they're not willing to go.
4. 
   Staying Firm vs. Adjusting Your Offer: Staying firm at your offer is a valid strategy, especially if you believe it reflects the true value of the property. However, be prepared for the possibility of losing the property if your offer is below their minimum acceptable price.
5. 
   Timing and Patience: Real estate transactions can take time, and patience can sometimes pay off. If you're not in a rush, waiting and re-submitting your original offer could be a strategy, especially if the property remains on the market.

Best of luck with your purchase,
KC

Hey BiggerPockets! 👋

I've been pondering the evolving landscape of our market, and something fascinating caught my attention: the rise of unconventional properties. You know, those unique, out-of-the-box spaces that make you go, "Wow, I didn't even know that could be a thing!" 🤯

So, I'm curious: What's the most unique or unconventional property you've ever invested in? Was it a historic mill turned luxury lofts? A funky underground bunker? Maybe a charming treehouse that became a hit on Airbnb? Share your story! 

I'd also enjoy hearing your thoughts on this: Are we seeing a trend towards these unusual properties in the current market? Are buyers and renters looking for something more than just four walls and a roof? 

Share your experiences, insights, and maybe even some photos if you've got them (we all love a good before-and-after transformation).

Looking forward to reading about your adventures in the world of the unique and unconventional.✨

Cheers!
KC

Quote from @Devin Peterson:

Buyer is under contract to close on their primary residence by Jan 5th, They came to me with the issue of having an incorrectly reported derogatory payment issue on their credit.

a credit card company incorrectly reported a 30,60, and 90 day late. I reviewed the persons payment history going back 2 years and can confirm they actually did not miss a single payment.

the big issue is that we cannot seem to get a conditional approval or approve eligible through LP/DU. I need to find a a way to get these late payments removed from credit in less than thirty days which is the standard timeline I’m aware of for this sort of thing.

360,000 sales price

5% down (tried Fannie and Freddie) haven’t tried fha yet - will run later

690 fico

45dti back end

1. I want to see if there are any resources anyone know about to have these reporting errors removed quicker, has any broker, lender or anyone in general had this scenario before and found a way?

2. Is there any cash buyer / private lender out there that would be willing to do a 30-day buy and hold (cash) for this buyer to get their credit straightened out? I’m sure transactional fees will apply. That’s ok

Hi Devin, 

Here are a couple of suggestions that might help:

1. Rapid Rescore Services: Some credit reporting agencies offer a service called "Rapid Rescore." This is a process where you can provide proof of the error (in your case, evidence that the payments were made on time) directly to the credit bureaus through a lender or broker. The bureau then updates the credit report within a few days instead of the usual weeks or months. This might be a viable option to correct the report quickly, but it often requires the cooperation of the lender or broker and the credit card company to provide the necessary documentation.
2. 
   Direct Dispute with the Credit Card Company: Since the error originated from the credit card company, have you tried contacting them directly? They can correct the error and notify the credit bureaus. You should provide them with all the necessary evidence showing that the payments were made on time. It's crucial to get written confirmation from them that the information was reported incorrectly and that they will rectify it.
3. 
   Exploring FHA Loans: You mentioned that you haven't tried FHA loans yet. Given the circumstances, an FHA loan might be more lenient regarding credit issues, especially if you can provide a reasonable explanation and evidence that the derogatory marks are incorrect.

Good luck getting this cleared up and closing the deal,
KC 

Hello BiggerPockets Forum Readers,

I'm currently exploring different mortgage calculators and came across Karl's Mortgage Calculator. I'm curious to know if anyone here has experience using this particular tool. If you have, could you please share your thoughts on it?

Specifically, I'm interested in:

1. - What you liked about Karl's Mortgage Calculator (the pros).
2. - Any drawbacks or issues you encountered while using it (the cons).
3. - How it compares to other mortgage calculators you might have used.

Your feedback will be incredibly valuable in helping me decide whether this tool is useful, or if I should focus elsewhere. Thank you in advance for your insights!

Best regards,
KC

Quote from @Jermaine Lindsay:

Good Day All,

I’ve just relocated to Baltimore City, MD and I bought my first project home that I plan to house hack and turn my extra room into a mid-term rental. It has an unfinished basement in which I plan to finish so that I live down there with my dogs.  I’m active duty military and I’ve also have been a licensed real estate agent for 10 years. Currently I’m switching gears to maintain my license, for referral purposes, while focusing more on becoming a landlord/investor. 

Hi Jermaine,

Congratulations on your new project home! It's exciting to hear you're embarking on a house-hacking journey and planning to turn your extra room into a mid-term rental. The idea of finishing the basement to create a personal space for you and your dogs sounds like a great use of the area.

Given your background as an active-duty military member and a licensed real estate agent with a decade of experience, you're well-equipped to navigate the complexities of real estate investment. Your decision to focus on becoming a landlord/investor is a strategic move, especially considering your extensive knowledge of real estate.

A few tips as you make this transition:

Understand Local Regulations: Familiarize yourself with Baltimore's landlord-tenant laws and regulations regarding mid-term rentals. It's crucial to ensure compliance, especially since laws can vary significantly from one city to another.

Network with Local Investors: Connect with other real estate investors in Baltimore. They can provide valuable insights, advice, and potential partnership opportunities. Consider joining local real estate investment groups or forums.

Optimize Your Property for Rental: As you plan the renovations, think about what tenants might value in a mid-term rental. Features like high-speed internet, a functional kitchenette, and comfortable furnishings can make your rental more attractive.

Marketing Your Rental: Leverage your real estate experience to market your rental effectively. Utilize online platforms, social media, and your professional network to reach potential tenants.

Financial Planning: Ensure you have a solid financial plan in place. This includes budgeting for renovations, understanding your cash flow, and preparing for both expected and unexpected expenses.

Legal and Tax Considerations: Consult with a legal and tax professional to understand the implications of renting out part of your home. They can guide lease agreements, tax benefits, and deductions.

Balance Your Commitments: As an active-duty military member, ensure you can balance your professional responsibilities with your landlord duties.

Stay Informed and Educated: Continue educating yourself about real estate investment strategies, market trends, and property management. Hint - BiggerPockets has many, many valuable resources between the people and information available throughout the site.

Best of luck with your new journey, and Thank You for your service!

KC

Quote from @Aaron Freeman:

Embarrassing question time!

I am embarrassed to say I have purchased 3 primary residences in my life, and don't have a clue how my agent handled offers.  

1) When reading about the BRRRR strategy it seems that it's common to make lots of offers before you are able get to the next stage. Are those offers simply verbal agent-to-agent conversations or is your agent actually writing a contract on each and every offer you want to make?

2) If you are making lots of "lowball" offers (probably a bad word but it's what comes to mind), doesn't that drive your agent crazy if they have to write up a contract on each and every offer and it's always a "lowball"?

3) Are contracts sent by email in this day and age?  

4) I believe in my state (Kansas) the seller's agent is obligated to present every offer made to the seller.  Is that true in all states?

Hi Aaron,

Your questions are quite insightful and common among many home buyers, especially those exploring investment strategies like BRRRR (Buy, Rehab, Rent, Refinance, Repeat). Here are answers to your queries:

Making Offers: In real estate transactions, especially when following a strategy like BRRRR, offers are typically made in writing, not just verbally. This is because a written offer is a formal proposal to buy a property at a specific price and under certain conditions. While verbal offers can occur during negotiations, a written offer is essential for legal and record-keeping purposes. Your agent would typically prepare a written offer for each property you're interested in.

"Lowball" Offers: Making numerous lowball offers is a tactic some investors use, but it can be frustrating for real estate agents, as it involves a lot of work with a potentially low success rate. However, a good agent understands that this is part of the investment strategy and works with their client accordingly. It's important to maintain a good relationship with your agent and understand that each offer requires effort and time on their part.

Contracts and Email: Yes, in today's digital age, contracts are often sent and even signed electronically. This method is widely accepted and makes the process quicker and more efficient. Digital signatures are legally recognized in most jurisdictions. However, it's still important to ensure that all electronic communications and documents are secure and legally compliant.

Presenting Offers to Sellers: In most U.S. states, a seller's agent is obligated to present every offer received to the seller, unless the seller has specifically instructed otherwise. This is part of the agent’s duty to act in the best interest of their client. However, the specifics can vary slightly from state to state. In Kansas, as in many other states, all written offers should be presented to the seller.

Remember, it's always beneficial to have a clear and open line of communication with your real estate agent. They can guide you through the nuances of making offers, especially in a strategy like BRRRR. Also, consulting with a real estate attorney might provide additional clarity, especially regarding legal aspects and state-specific regulations.

Cheers,
KC

Quote from @Sharon Supera:

Hello BiggerPockets community,

I’m grappling with a significant real estate decision and would appreciate your insights. Here’s the situation:

We own a detached home with 2 units, consisting of a legal 2-bedroom basement and a 4-bedroom, 3-bathroom upper floor. Purchased 14 years ago for $500,000, the property is now valued at $1,500,000. We rented it out 6 months ago due to our need to move to a more accessible condo for a family member with a recent physical disability. The current rental income is $5,300/month, while our mortgage is $1,500/month, property tax is $600/month, property management costs $200/month, and maintenance expenses are currently unknown.

We've utilized a HELOC from this property, amounting to $300,000, for renovating the basement and investing in a preconstruction condo and another property in a different city. Currently, we're renting a condo for $2,600/month, and while we wish we were putting that money towards our own condo, our funds are tied up in the preconstruction condo and the out-of-city rental property. Unfortunately, we can't sell the preconstruction condo as it won't be completed until 2027.

Given our situation, we need the accessibility of a condo for our family’s needs, and the idea of returning to our home is daunting, both for maintenance and our compatibility with living alongside tenants. I don’t have funds for a condo down payment unless we sell the other property to free up cash.

My dilemma is whether to keep the house and wait for the market to reach $2 million, go back and live in it, or explore other options. I would greatly appreciate any suggestions or recommendations you may have.

Thank you for your valuable insights!

Hi Sharon,

Your situation presents a complex decision matrix, and it's good you're seeking different perspectives. Let's break down your options considering the various aspects of your situation:

Keep the House and Wait for Appreciation: This option banks on the real estate market continue to appreciate. If your property reaches $2 million, you'll realize significant capital gains. However, there are risks involved, including market fluctuations and the ongoing costs of maintaining the property, along with your HELOC obligations. Additionally, it does not address your immediate need for an accessible living space.

Return and Live in the House: Living in your property eliminates the rent you're currently paying, and you'd still benefit from rental income from the other unit. However, you mentioned the challenges of living alongside tenants and the house's incompatibility with your family's needs due to a physical disability. Renovations for accessibility could be an additional cost.

Sell the Property: Selling could free up a significant amount of cash, allowing you to pay off the HELOC and potentially purchase a condo that meets your family's accessibility needs. The downside is losing a valuable asset that generates rental income and potential future appreciation.

Exploring Other Financial Options: You might explore refinancing options or other financial instruments that could allow you to access the equity in your property without selling it. This could provide the necessary funds for a down payment on a condo. However, it would increase your debt obligations.

Consulting with Professionals: Given the complexity and the high stakes involved, consulting with a real estate financial advisor or a mortgage broker could be beneficial. They can provide tailored advice based on a detailed understanding of your financial situation, real estate market trends, and tax implications.

Consider Market Trends and Timing: Keep an eye on the real estate market trends, especially in the areas where your properties are located. Timing can significantly impact the returns on your investments.

 
Best wishes and good luck with your decision,
KC

Quote from @Jason Crowe:

Thank you.  Whats a timeline normally?  Have you done this in Duval County before?

 I will touch base with you. My only experience is in Clay County.  Talk to you soon!
KC