All Forum Posts by: Jeff G.

I keep hearing bits and pieces about a rental strategy that is best called "Renting to the Disabled by the Room for Above Market Rent" that goes something like this: 

(1) Buy a house with as many legal bedrooms as you can that still has a decent sized common area, (2) rent it out to the relatively high functioning disabled crowd, (3) via some [unnamed] Government program the State pays above market rents for each of the tenets. (4) Send a house keeper 1-2 times per week to ensure the place stays clean and otherwise make sure there are no issues.

The up side is: you get above market rent with a much higher than average tenant count. The opportunity cost issues are: having to pay all utilities plus a housekeeper along with some regulatory overhead from the State, along with some "gotchas" like not being able to put locks on bedroom doors or you're technically operating a boarding house which is a whole different can of worms. You're still just a property owner, not in the medical business. The state pays you, not the tenant.

Allegedly, the tenants do better because they're in a communal setting and the case workers love it too, because they don't have to travel to as many houses.

As there are broadly similar approaches to student housing, this isn't setting my BS alarm off; at least, not exactly. All of this seems reasonably plausible, which is why I'm bothering to ask about it. It just seems like there must be more to it or a lot more investors would be doing it.

I've tried to Google this, but without an exact program name I'm not getting very far. Is this really a thing? I'm just trying to wrap my brain around this strategy and assess its legitimacy. If legit, what program (or programs) is this kind of strategy taking advantage of? Are there any major pitfalls?

@Jason Lavender your copper coming soon to a thief near you. Nah, I'd skip it.

Thanks @Simon Ghandil,

Two questions based upon what you just said.

As to #2, what sort of tenant qualifications do you find most useful when dealing with lease options / rent to own? I realize most of these people either have challenged credit, are self-employed or the like. What are some rules of thumb here? I realize every market has its differences.

 As to #3, how much more than market rent is typical? When negotiating deals often the mortgage holder wants cash flow too. If you both want $200 cash flow on the deal, that's potentially median area rent +$400. Or, do the numbers not typically work out that way because note payments are less than median area rent?

The whole state, @Jorge Borges. Wow, that really helps. Those are ownership records, right?

Any idea how to get eviction cases?

Okay, @Christopher Phillips...

Lets say you have an agreement to sell the property some time within the next 5 years from the not holder... You get a tenant-buyer in the place for $XXX/month... enough to cover the mortgage payment and give you some cash flow... The tenant has an an annual lease with an option to buy... they renew for a few years but never actually buy the place.

I realize that you can renegotiate if things drag on, but sooner or later you're going to have to give the seller his money. 

What do you do if you're stuck holding the back at that point? Or, am I missing something that would make this outcome profoundly unlikely?

BTW, the one guy I know who does these things... he agrees to sell the subject property in 2 years. I think that's crazy and way too short. Maybe you disagree.

Okay, @Account Closed.

Have you ever had a Lease Option go bad (post-Dodd-Frank/Safe) in some way that you're willing to share?

~Jeff

So, all of a sudden I'm hearing a lot about Lease Options again. I thought these things were basically eliminated as a viable investment strategy when Dodd-Frank was enacted. 

Apparently I was wrong, so naturally I have some questions:

1. I thought Dodd-Frank (or possibly the Safe Act) handicapped Lease Options severely by setting the yearly maximum to some low figure like 3 per year. I'm hearing you can legally get around this limitation by doing no more than 3 Lease Options inside a single entity such as an LLC and then spawning a new one to hold your next three deals, etc. Is that accurate?

2. It's my understanding that, historically, Lease Options had a high failure rate. That is, the tenant-buyer would often not have good enough credit to buy the house at the end of the lease or the buyer falls on hard times and leaves/is evicted. 

I love making a buck the same as anyone else. However, I am not going to set a tenant buyer up to fail in the process. Is that perception accurate? If so, how do you mitigate these things in a way that is fair to you (profit is made) and gives the buyer has a high (lets say, >80%) of success all things being equal?

3. What are the actual down sides of doing lease options? What can go sideways that tend not to get addressed?

Of course, before doing anything unfamiliar in real estate I'll talk to a good Real Estate lawyer and cover my backside. I just want to get a sense of what BP has to say on the subject.

Oh, and what is the difference between a Lease Option and a Sandwich Lease Option?

Well, damn @Jonathan Jaime Velarde. Don't blow it all at the MCX. :)

I don't mean to be a wet blanket. But, in my view 22k is a savings and emergency fund not investment capital. OP, do you have a safety net beyond the 22k?

Hello @Jessica Zolotorofe,

First off, is the statewide website for owner names I may have found. Is that the Data Universe site, or something else?

I'm actually looking for several different records for mailing list generation purposes. I'm primarily focused on active eviction cases and active foreclosures cases. I should note I'm not actually looking for individualized filings, which it looks like clerks want to charge me 5-7¢ per page for -- per some court website I read earlier. Rather, I'm looking for a CSV/Excel extract or HTML table -- or something -- with row after row of [plaintiff] v. [defendant] at [subject property address] information.

I think I found the property tax listings, it's a giant text searchable PDF. I can run with that.

There are other handy records I like to have, but those are the most important ones. 

By the way, how does your state handle probates? Is there a central site where "notice to the creditors of the estate of..." type probate notices are posted?