Check out almost every publication that deals with creative real estate and you'll see myriad approaches to acquisition of properties using both conventional and private financing. Erudite newsletters for many years have dealt with sophisticated strategies for slicing and dicing mortgage instruments and notes to create amazing rates of return. Investors have become fairly sophisticated when it comes to mortgages. Most have a working knowledge of hand-held calculators that can calculate precise rates of return on their investments. But these same people are lost when asked to explain about Leases, or how they can be created and employed to build cash flow and profits. This month, we'll see if we can remedy this.

Continue reading “Lease are Creative Real Estate’s Orphan Child”

  Just as Note terms can be indexed, so can Lease terms. With a Note, the interest rate can be pegged to the prime rate or to one of several major bank interest rates. I often index loan rates on my installment contracts to the HUD rate for FHA loans. Hence, when inflation drives up interest rates, it also drives up my cash flow, enabling me to keep pace with the rising cost of living. The indexing terms can be built into the language of the debt instrument, or the term can be shortened so that the Note has to be either paid off or refinanced at the prevailing interest rates every few years.

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  Leasehold Estates extend to Land Leases under the terms of which a fee simple land title holder agrees to let another person erect or buy the improvements in whole or in part situated on his land without paying for the land itself. They then sign a long term lease spelling out the rental scheme for the duration of the leasehold estate's term. Land Leases can be created either by a Lease or by a Deed in combination with a Lease. Here's how:

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Continue reading “High Yield Low Management Rentals”

Admittedly, lenders are casting a jaundiced eye on marginal borrowers and those who flip houses for a lving, but this doesn’t necessarily apply to stable owner occupants with high FICO scores. To build up its cash flow, an enterprising Brokerage corporation in New England has offered a reverse rental to provide the down payment for any of its tenants who buy one of its houses, or any other house in its State. In the slow sale market being experienced, this is one way to create new buyers from among qualified tenants who don’t have the down payment funds with which to buy a house or condominium. Offering a rental credit to those who otherwise might never be able to own their own home might enable the landlord or any other affected seller to receive full value for his house rather than having to reduce the price. It’s easy to see why a landlord might want to sell out in this market, take the money, and sit on the sidelines until the market makes up its mind as to what it is going to do. That’s what I’ve been advising for a couple of years.

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