All Forum Posts by: Randy E.

@Robert Campbell,

Taking into account everything you said, I'd sell the property, take my share, and invest it in my usual market.

Investing long distance is possible, but not always the easiest things to try.  I've learned firsthand that even 90 minutes away can create a barrier to efficient management.  It's not always easy to transfer the talents of successful local management to successful long-distance management.  The details don't really matter.  Just be aware that a lot of methods you have perfected as a local investor will not work the same for a long-distance investor.  Some will, but you'll have to learn to work/manage differently.

There is no need for you to reinvent the investment wheel for yourself for a one-off long-distance deal.  It's not worth the headaches and risk.

Sell it, take your cash, and enjoy.

@James Johnson,

If you have honest concerns that the house you're renting is not legitimately represented, my sincere advice is to move as soon as you can.  There are many unknown parts to the equation you presented, but there are some easy answers to other parts.

1) If your landlord owns the property, he can sell to you if he chooses, or not sell if he wants to keep the house.  Ask him.

2) If your landlord does not own the property and some unknown financial institution owns the house, the odds of this mystery financial institution selling the house directly to you (on your timeline, no less) is ZERO, NIL, and NOT GOING TO HAPPEN.  If the financial institution discovers the property is being illegally rented, the mostly likely course of action is going to that any tenants (YOU, in this case) will be legally evicted - and once the property is vacant, it will be placed on the long, slow, slow, slow trail toward auction.

3) If the landlord is legally renting the house to you and you stop paying, you will most likely be evicted very soon.

4) You've mentioned several times about wanting to buy the house but not wanting to pay property taxes in case the sale is not valid.  It sounds like you might be planning to purchase the house on a Lease-To-Own contract.  Is that true?  Have you discussed with the landlord if he would even consider participating in a L2O contract?   

 Definitely.  Anything is worth a shot.  I once got a house for $9K because I took a shot.  If you don't take the shot, you never know if it might have succeeded.

Hi James,

I won't say it can't be done, because every owner is different, every house is different.

But speaking for me personally, I'm trying to figure out what would make me, an owner, agree to your deal.  You've pointed out the pros for why it is a good deal for you and why you think it's a good deal for an owner.  Here's my side.

1) "I figure this would be a win-win for both sides considering the seller
would collect a non-refundable deposit"

This is really the only aspect that has a snowball's chance in heck convincing me to do this.  Let's say I have a house/condo worth $150K.  In order to do a Lease-option there would have to be a premium on the sale price.  Let's say $165K.  Now, how much cash would it take for me to lock myself out of selling the house for $150K today, in order to "maybe" sell it to you in three years?  $5K?  Nope.  $10K?  Nope.  Remember, this is Charlotte, a hot market.  A well-kept, accurately-priced house will sell quickly.  I can have $150K in my account in one month.  Maybe in two weeks if I sell it for $140K.  How much will it take to wait three years to cash out on a house I want to sell today?  For me it would take at least a $25K non-refundable down-payment.  If I think about it too long, I might say $30K.  If I'm going to wait three years for my money, I want to make sure it hurts you to walk out on the deal.

2) "cash-flow for the years I'm leasing it."

Unless you're paying me a monthly rent 25% more than market rate, this is not an added benefit over renting it to anyone else.  And the fact that you plan on sub-leasing it to a third-party makes me like this set-up even less.  My take is, what if your tenant severely damages the property.  Let's say three month's lost rent (approximately $4000K) by the time you get him evicted, and once you get in you discover $16K of damage.  After you've just paid the non-refundable deposit and maybe spent $4K on carpet/paint/whatnot before the first tenant moved in, are you really going to want to lose another $20K because of this bad tenant?  Maybe you decide that the best business decision is for you to bail on the deal and return the house to me unrepaired.  Now I'm spending the deposit you paid me to repair the damage your tenant caused.  Nine months after "selling" you the house, I have it back in my possession with no extra money in my pocket but having undergone a lot of effort ... for nothing.  As a real estate investor, this is the scenario running through my mind.

3)  "and they wouldn't need to pay a realtor."

That's not a bonus for me in this situation.  If it costs me $7500 to get $143,500 today, versus waiting three years, I'd say that was money well spent.

4) "Another plus for them would be that I plan to make renovations on the property and fix it up cosmetically so that I force equity into it. I would care for the property as if its my own and handle issues and repairs so the owner wouldn't even need to worry about needing a property manager."
That is no different than any other Lease-Option, so that's not really a bonus.  Also, if the house is already in rent-ready condition, no renovations are necessary.  No cosmetic touches really matter.  And if you're serious about buying the house in three years, I don't care whether you "force equity" into it or not, because I won't see any profit from that.  My concern would be that you might not buy the house and leave me with a property in worse shape than before we signed the deal.  Hmmm, maybe I should increase that downpayment to $45K?

The only way this sort of deal would appeal to me in a hot market would be if the house is in subpar condition, I'm having trouble renting it at market rate, and I don't have the money to repair it. Say I have a house that has an ARV of $150K, but it is currently worth $100K. Maybe then I Lease Option it to you at a sale price of $115K with a non-refundable downpayment of $15K-20K. But again, if I can get $100K today, why wait three years to get $115K?

This is only my opinion.  I'm sure there might be other owners willing to do this.  But, I'm not sure the houses will be in the condition you're expecting.  And I'm not sure it will come at a price that will make you feel like you got a steal.

Good luck.

 Wil,

With my first S8 tenant, my first check was late.  Like you, I started to get very worried.  After a week or 10 days, I emailed the S8 contact but got no response.  A few days later, I visited the office.  It turns out, in my city at least, that if a tenant moves in after the S8 office has processed their paperwork for the month, the landlord will not receive a check for that month during that month.  When month 2 rolled around, the money for both month 1 and month 2 was direct deposited into my account.  If a tenant moves in on August 26th, I will not receive any money from S8 until the October rent is direct deposited around Oct 2 -- at that time, I will receive the pro-rated rent for August, the rent for Sept, and the rent for Oct.

I would have been okay with the delay had I known about it, but not knowing about it caused me all kinds of worry during those first two weeks.  In my experience, unless I have a tenant lined up, the lease signed, and the property approved by S8 by the 25th (approximately) of the month, that first payment will not arrive until the second month.  Now that I know this, I don't worry if that first month's payment doesn't show up.  In fact, as I receive the approval from S8 for the new tenant, I say/ask, "I won't receive payment for this month until next month, right?"  And they tell me.  If I don't ask, they don't tell me.

Because you just inherited a tenant, I assume you had to fill out all the paperwork, including Direct Deposit information.  What date was that completed?

NC is a big state.  What city?  Identifying a specific area might help generate some responses.

Do you have a good reco for the Triangle area?  I'm strongly considering going prefab on a couple of lots ... if the price is significantly less expensive than regular construction.

For single family houses, I include language in the lease that explicitly states the tenant is responsible for pest control.  My thinking is that if the house was pest free before the tenant moved in and the tenant later complains of pests, then the tenant introduced and/or otherwise caused the problem.

For multi-family units, I would include pest control as a landlord-provided service.  In multi-family buildings, it is entirely possible that one tenant can introduce a pest problem that spreads to other units.  Thus, it would be hard to prove exactly which tenant created the problem.

 Travis, I've received these type of calls before.  From home health care agencies, housing for veterans agencies, housing for homeless single mothers, housing for recently released prisoners, to several other types of agencies.  Most checked out as legit.  Aside from the home health care agencies, most of the others seem to operate similarly to Section 8 rental agencies.

I have a friend that runs a home health care company.  She found a house that had recently been renovated and signed a 2 or 3-year lease with an OOS landlord.  She said they need leases longer than 1 year to ensure they don't have to keep moving the tenants/patients around every year.  She housed very elderly people who couldn't damage the properties.  The residents mostly sat around watching television or sat on the porch and stared at the yard. Years later, that house remains in immaculate condition.  As a landlord, I am jealous.

The home health care agency did require one alteration.  They had to have a handicapped ramp added to one of the doors.  But the company (my friend) paid for that, not the landlord.  I would assume the company, not the landlord, would also be responsible for removing the ramp when the lease ended and they moved elsewhere.

Good luck.

Shawn, my very loose understanding of those HFH deeds is that it addresses the original owner's ability to immorally profit from the gift of underpriced/free housing they are receiving from HFH.  I looked at a couple of those deeds (in NC) many years ago for acquaintances who had received houses from HFH.  I think those deeds state something to the effect that if the original recipient of the house sells the house within a few years of taking ownership, they have to return to HFH any "profit" over and above the monies the resident/owner had put into the property.  As the years go by and the original owner actually lives in the property as planned, that percentage is reduced to near zero.  With only 8 years left on the original deed, my guess is there isn't much of a penalty to be paid.  Find out what, if any, penalty is owed, and adjust your offer price to reflect the extra costs.

Were I you, I'd have an actual lawyer read the actual original deed and tell you what he/she thinks of it.  Don't rely of the hunch of a self-admitted idiot on the internet.

I am not an attorney and this is not legal advice.