All Forum Posts by: Brandon Gadish

Ralph,

I think you restated mostly what I was trying to say with a couple exceptions.

FIrst, It can get sticky sometimes not just with the owner,but with the tenants that are buying. I have had a hand full of cases where The tenants almost did not buy because they were able to see how much more they were paying for the property than I was.

Point is that there are issues both ways, you just need to decide what is more important to you as the investor.

Second, I dont like to record the option with all the details of the agreement. I do however, record a memorandum of option. It shows that there is an agreement that exists, but the whole world doesn't get access to your specific agreement. With my specific agreements there is wording that makes it so I also get the principle paydown as well, so there is not an exact dolar amount determined until closing. If you were not interested in getting the paydown (it would be crazy not to) then you could just put a dolar amount that you would receive out of escrow at closing.

It's a great comment, and thanks for the feedback. I'm surprised more people are not interested in this one.

Brandon Gadish
Landlord Technology LLC

I have no clue about the process for closing a real estate transaction in Canada, but my suggestion to you would be to talk to a realtor that has experience in dealing with real estate investors, and/or spend the $200 for an hour with a real estate attorney. It will probably give you some insight into how the process works in Canada.

The bottom line is that you will need to know about all the encumbrances on the property, money will change hands in an escrow account, and there will be an instrument for transfering ownership of the property. Your job will be to find out how that is all done in standard transactions, then branch out from there.

Hope this helps

Brandon Gadish
Landlord Technology LLC

Shawn,

That is a great question. To address your first question, Use your lease option form for tenant buyers. You should have 2 forms if you are doing sandwich lease options. The first with the seller will allow you flexibility and more security, the one you use with the tenant buyer should (in my opinion) be accompanied with a rental form. I like to use that so if we ever do have to evict, it is treated more like a rental than a purchase. So use two forms.

Second if a tenant buyer asks you about who is on title, which has happened to me before, I explain to them that I am partnering with the owner to sell the house, and that you have authority to sell the house. If they really want to see evidence, you can have them go to the county recorder's office and look up your memorandum of option that hopefully you filed with the county recorder in order to cloud the title and protect you from the owner refinancing without your knowlege.

Generally you will not have too much of an issue with that, and if they are that insistant on it, move on to the next tenant buyer.

Hope this helps,

Brandon Gadish
Landlord Technology LLC

You guys have totally valid points. Which is why I was sure to say it is not for every situation. It happens to be my preference because in my experience with dozens of properties and hundreds of tenants in all types of areas I have never had a property damaged when utilizing the pay to leave method. I think we would all aggree that is a larger concern than the lost rent.

I see a lot of Tweets with links to articles, however I generally never click through on them. I am personally mostly interested in personal experiences and interesting things people have to say about their real estate and business experiences.

The question: Is it better to have a large quantity of Tweets that generally have not so personal or interesting information so your followers consistently know you are there, or are you better served to share original information on Twitter which will come at the price of fewer Tweets?

Ha I guess that is another option, although I have never personally used that one. I would guess that is probably better left to the real small towns. Good Comment!

In a handful of states including Washington there is a tax that must be paid for the privilege of selling a real property. In Washington State the tax is 1.78% of the sale price.

I have done many sandwich lease deals where I entered into a lease option agreement with the owner, and found a Rent-To-Own tenant that would live in and eventually buy the house.

Let's now say you’ve made it to the closing table with your Rent-To-Own -tenants and are ready to complete the deal. Just do a double or simultaneous closing right? That way your owner never has to know how much you are making on the deal, and you control the closing. If you do a simultaneous closing in Washington, you will pay the excise tax 2 times. In other words you will not pay just 1.78%, but you will pay 3.56% or $3560 per $100,000 based on the sale price. It will be assessed at the transfer to you then again at the transfer from you to your tenant buyer. The reason I say YOU will pay it twice, is because the owner will not generally be willing or able to pay their portion of the transfer tax, and you will certainly pay your portion in transferring it to the tenant buyer.

For me it is hard enough to choke down the cost of paying it once, but twice would break some deals. It is like taking the cherry off the top of my ice cream sundae. But none the less there are basically 2 options.

1. Do a double closing or simultaneous closing
2. Have your Tenant Buyer close directly with the Owner and you get paid out of Escrow

Both options have their benefits. By doing a double closing, this isolates your tenant buyers from the owners, and the owners never know how much is actually being paid for the property. This is helpful because sometimes there are hard feelings at the end if the owner feels you are making too much on the deal. Of course like I mentioned before, there is that pesky double excise tax as the downfall to this.

Option 2 is great from a transfer tax perspective because you will only pay it once. The downfall is that your owner will know exactly how much your tenant buyer is paying for the property. None the less I prefer this because I generally make sure the owners know throughout the deal that I expect to make a profit. Although don’t underestimate the power of the owner’s greed in those situations.

If you chose Option 2, here is what you need to know. Your owner will not willingly pay you the money you are owed, so don’t set them up to close with your tenant buyer and expect your owner to come drop off a check to you on a handshake agreement. I have them sign a Deed of Trust essentially putting another mortgage on the property that secures my interest in the deal. Part of the closing will include you completing a Notice of Demand in the amount you expect to receive at closing. Without getting into too much detail, those two documents will ensure you get paid properly for all the work you have done.

Brandon Gadish
Landlord Technology LLC

I just had a discussion about evicting non-paying tenants. I would love to hear other’s experiences here, but here is my preferred method of handling non-paying tenants.

I believe that people generally want to do what’s right (and don’t get me wrong, not all people do). Having said that, there are many circumstances that put people in situations to do things they would not normally do, and usually those circumstances have to deal with money and/or personal relationships. If someone is in a situation where they need to chose which bills are the most important to pay, they will automatically default to the basic human needs food, clothing, and believe it or not, yes they will generally pay for shelter too. So if your tenant is not paying rent anymore it is likely they are in a much worse situation than just not paying rent. When people get in a desperate situation they take desperate measures, and if they feel like the landlord is not sensitive at all to their situation along with all the rest of the world (true or not it is how they feel), they will often times be very difficult, and the eviction will rarely end up in a good situation for the landlord. There will be extensive repairs, and several months of unpaid rent, not to mention the time needed to repair the property.

I do take a hardnosed approach when they move in so I can set expectations up front letting them know I expect rent to be paid and paid on time. When I have had a tenant that paid fine for a while then all of a sudden not so much anymore, I need to question what is really going on (see the previous paragraph). Once I determine that a tenant will not be able to pay their rent; Instead of immediately taking the hardnosed and costly approach first I will offer them a cash payment toward their next deposit as long as they move out by the end of the month, and they leave the place in good order. This will appeal to their financial situation as well as make them believe you at least sympathize with their situation.

Offering a tenant $400 towards their next deposit to move out seems ridiculous at first, until you go through the standard eviction process to get your property back. After you get it back it has $4000 in damage.

And don’t get me wrong here, I know each situation is different, and there are certainly times that an eviction is in order

Brandon Gadish
Landlord Technology LLC

Just a word of caution. There are a lot of things to think about when dealing with a property that is not within a reasonable distance from you. I would never suggest buying property sight unseen unless you have a person you trust to relay information on it for you. If you are interested in investing in Washngton, there are some things you need to be aware of. I am starting to post them in my blog. Check it out, and feel free to contact me if you have questions.