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in reply to: Is anyone using a Checkbook IRA?
Thank you for that response Brad. I attended a John Schaub seminar recently and he made a passing comment that if he were to go back in time and do it all over again, he may have become an insurance salesman because of all the money they make; this would of course been a supplement to building wealth through real estate. I’m considering making that transition because very few people I talk to about real estate are potential real estate clients, however nearly all of them could use a good life insurance policy and some financial planning to go along with it. I figured if some of you here feel like they are good products then I can speak with that much more certainty and clear conscience that these are products my clients should have.
Good morning Jackie,
I need to know: why can I not put a balloon on the note with the buyer or seller? Is this a conflict with Texas State law similar to the lease options? I was thinking one possible offer could be to give him debt relief by taking over payments and then paying him x,y,z after 10-15 years.
I don’t know if it’s too much to ask but would you feel comfortable if I sent you photos of the property so you can estimate what repairs would be? I have your email from previous correspondence. I still feel like estimating is a weak suit of mine; it still seems too abstract for me. In this neighborhood there was a 1700sqft house that sold for $268,000 after only 6 days on the market but there was some serious money that went into it (think platinum level remodel). The majority of comps however are selling for around $160-$170K in like-new condition at the silver or gold level remodel: New cabinets, flooring, appliances, bathrooms……..but they’re sitting on the market for an average of 45 days.
Here’s what I’m having a hard time grasping: I could put maybe $5,000 into it to make it rent ready, or I could invest $15,000 to get it to one ARV tier level, I could invest $25,000 to get it looking even better, or I could invest $50,000 into it to make it top of the line similar to the home that sold for $268,000. To me ARV and Repair estimates are not at all concrete, you can get a couple minor upgrades or you can get all the bells and whistles: which do you use?
I loved your illustration in “Diary of a Rental Property” and I’d like to start creating that kind of portfolio. Based on what you said there and what I learned at a recent John Schaub seminar, properties tend to double in value every 10 years or so. If that’s true I could bank on this house being worth at least $250,000 in 10 years. If I could structure some kind of balloon payment, all that equity would be more than enough to throw some change at the seller. Not to mention I’d have at least $300 in cashflow every month. I hope ballon payments aren’t illegal in Texas………..looking forward to your response Jackie. As well as anyone else who’d like to chime in…….Have a great day everyone.
“IN Texas, you can still buy with a lease option.
You just can’t sell with a lease option unless the buyer’s option consideration is non-refundable AND you give them the deed within 6 months.
Remember, with a master lease, you don’t need to get an option. You can do master leases in Texas.
You can do wraps! Buying with seller financing then selling with seller financing is still legal in Texas. If there is an underlying loan, you can either buy subject-to the mortgage or buy with a seller finance wrap.
Get options then do a highest bidder sale.
Get options then do a wholesale flip
Buy subject-to then keep as a rental
There are still a LOT of things you can do – but selling with a lease option or selling with a contract for deed are not on the list for texas.”
What are the pros and cons to buying with a wrap vs sub to? Which would you prefer if you plan to hold onto the property long term to bank on cashflow and appreciation.
I’m currently talking with a seller that is open to working something out that includes a long term payout but there is no equity in the property; here are the facts:
PITI: $1,050 fixed/no balloon
Rental Value: $1,400
As-Is Current Market Value: $123,000
Mortgage Balance: $150,000
What offers would you make?
Good point Don. Last September I was in Las Vegas attending David Tilney’s property management seminar which included master leases. I found performance leases to be a very interesting concept. How would you convince a seller/owner to enter a performance lease? Or perhaps the proper question is where do you find the types of owners that are primed to enter these agreements? What’s in it for them? How would you handle their objections. All of the leads I’ve spoken with are only interested in cash, and they usually want way more than I’m willing to offer. I’ll eventually run into an owner who is open to a performance lease by way of the Law of Averages, however, I’d rather save time and go the targeted route if possible.
Dee, as one of the newest members to the site I’m just curious; what is the preferred model?
Interesting article Dee, thank you for that. You’re absolutely right, the depressed oil prices had everything to do with him losing his job…….that and his work ethic, or lack thereof. He’s been unemployed for nearly two years while companies are relocating workers from other areas, we’re seeing more hiring, and there’s apartments and hotels popping up throughout the area. Oil companies took a hit with this slump but they trim the fat when need be and technology is making production more efficient. Real estate has actually been very stable……..that’s not to say it’s still the seller’s market it was 4 years ago but it’s still very active.
I should have added the seller has a free and clear 2br/2ba mobile home he may be willing to throw in to sweeten the deal. . . .I’ll admit though, I’m still nervous about entering some sort of Master Lease situation out of fear I may not be able to find the right tenant soon enough or that a vacancies could turn a deal into a negative cashflow situation. Between the house and the mobile home I estimate ( very conservatively) I should be able to get $2,000/month in rent leaving me with $400 cashflow each month.
Hello Jackie, sorry to keep beating a dead horse, but how would you buy with a lease option? Meaning how would you negotiate the deal to convince the seller to deed you the property in 6 months? Is it better to just focus on sub-to and seller finance in Texas to avoid any recourse? What’s the best way to structure a deal when there is low equity in the property? Is a highest bidder sale still an option? A wholesale flip is out of the question at that point. Buying sub-to and keeping as a rental sounds like a viable option but maybe you prefer another way to control the property as a rental with little risk and still be able to capitalize on appreciation at a later sale date……..in reply to: "Granny Flats" wars with city regulators
Excellent advice Dee………would you please share with us how you would go about checking out the legal and permit history of your subject properties? What office would you call, who would you ask to speak to, would you search online……whatever it may be please share with us your approach. Thank you.
On the square footage issue, I guess a more direct question would be, when determining what the square footage of your subject property is do you combine garage and house, rely on the appraisal district information, or do you refer to the MLS? I want to avoid going out tho the property and measuring room to room or paying someone else to do that before I even make an offer, that way I can run the comps accurately. Again sorry for all the questions, I know after you’ve been doing this for so long they seem like no-brainers.
Excellent, thank you Jackie.