There is more to real estate than just equity. Once you have a bit of wealth you start looking for tax write offs and real estate investing (done properly) allows for wealth accumulation – with NO tax liability. That compounds your net worth much faster.
Proper real estate investing is just like anything else, it can be learned, but if initially learned the wrong way it sets you back. Bad investing can be unlearned but it means you’ve wasted time and wasted resources and it can get darn frustrating.
Truly Passive Investing at it’s Finest
I have a couple of Tenant Buyers waiting for a place. Can’t put them in until the property is in the name of the investor. Checks and agreements have to be made out to the investor. Investor must approve the Tenant Buyer.
Q. What is it that you actually do?
Q. What is “Subject To” also called “Sub To” and “Sub2”?
Q. What is a “Lease Option”?
Q. Why would someone sell their home this way?
Q. Do I need a down payment?
Q. What is the Capital Expense (CapEx)?
Q. What is Dodd-Frank?
Q. What kinds of houses do you have?
Q. What is the difference between a Lease/Option and Rent to Own?
Q. What areas do you cover?
Q. Do I have to go to a bank?
Q. How long does it take to be approved once I decide on a house?
Q. How much income do I need?
Q. Why don’t I just get a mortgage from the bank?
Q. How long does it take to get a Tenant Buyer?
Q. Do I need a down payment?
Q. What do you need to know from me to get started?
We find the Property. We install the Tenant Buyer
The Tenant Buyer Does all Maintenance & Repairs
You get their Option Deposit (Usually $15,000 to $25,000)
You get the Cash Flow – Usually $500 to $700 per month
You get the Tax Write offs & Depreciation
You get the Principal Pay Down (they are paying down your principal
No Toilets – No Hassles – No Worries
Property is Now Available
Email: NewPath2010@hotmail.com – Attn: Ken
Q. What is it that you actually do?
A. We buy houses and sell them as Turnkeys to Investors. Then we put people (Tenant Buyers) with good incomes but damaged credit in them. The Tenant Buyers give the Investors an Option fee – the Tenant Buyer then gets their credit fixed and they refinance and pay the Investor off. The Investor owns the home until the Tenant Buyer completes the Option agreement. The Investor gets the Option fee, the monthly cash flow, the tax write offs, and principal pay down. To see how the numbers work click here:
http://PassiveIncomeGrowth.com/735 These are numbers from one such Turnkey
Q. What is “Subject To” also called “Sub To” and “Sub2”?
A. When you do a “Subject To” you Own the Property and you are taking over the loan. The monthly payments are paid by you.
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Q. What is a “Lease Option”?
A. A Lease is an agreement between a landlord and a tenant. The tenant may occupy the rental for the amount of time specified in the agreement for the amount of monthly payment agreed to.
An “Option” is an agreement between the seller and the buyer that allows the buyer to buy the property by some specified date in the future for a specified amount. For instance, the agreement may be that the “buyer” has the right to buy the property within 3 years for $225,000. The buyer does not own the property until he “exercises” his Option. When the buyer “exercises” his Option, he usually gets funding from a bank and pays the seller the amount owed. If the buyer doesn’t “exercise” his Option and his Option “expires” he no longer has a legal right to buy the property. During the Option period, the seller can not sell the property and can not raise the sales price, even is the value of the property goes up.
You can have a Lease without an Option (which most people who Lease do not have an Option) and you can have an Option without a lease, though this isn’t common.
What we do is combine the Lease and the Option to make it a Lease Option. The Tenant Buyer can occupy the property during the Option period as long as he pays the agreed to monthly Lease amount.
Q. Why would someone sell their home this way?
A. Sellers do these because they don’t want to work with real estate agents or they don’t want to fix up their house to sell it (too busy, too much work, no time).
Actually, it is very lucrative. These are generally Not Fixers – Most sellers in this situation either:
1) have to sell quickly or
2) don’t have enough equity to cover real estate fees, closing costs and other fees or
3) don’t want to or can’t afford to do repairs and or don’t want to have people traipsing around their house
4) have bought another place and are carrying two mortgages or
5) lost a job or have a medical emergency, etc or
6) are in pre-foreclosure and have to do something quickly or
7) are inherited with a mortgage and can’t make the payment or
8) have a job transfer and need to sell quickly
Q. Do I need a down payment?
A. No, the Turnkey Fee covers all of that
The $70k to $80k Turnkey fee covers the advertising, bringing the seller’s loan current, paying equity to the seller, prepping the house for a tenant buyer, whatever is left over is my fee. So, with a house worth $225,000 and a loan of $140,000 – and a payment of $1000 a month, you would take over the loan of $140,000 plus make the monthly payment plus pay $80,000 so you would owe $140,000 on the house plus have $80k invested in a $225,000 house. Then we find you a tenant buyer who gives you $20,000 option fee (that is yours to spend) and they pay you $1500 a month, you pay the bank $1000 a month for the mortgage for a cash flow of $500 per month. You get the tax write offs – they pay down the principal for you.
Q. What is the Capital Expense (CapEx)?
Expenses, maintenance and repairs (CapEx) are taken care of by the Tenant Buyer. There is no CapEx to the investor.
Q. What is Dodd-Frank?
Q. What is Dodd-Frank?
A. It is a series of laws that have changed how banks can lend money. It makes it much harder for people to qualify and to get a loan. You can read about it here: Dodd-Frank
When you do a ‘Subject To” you are taking over the loan. Those payments still have to be paid by you.
Sellers do these because they don’t want to work with real estate agents or they don’t want to fix up their house to sell it (too busy, too much work, no time) if s seller filed bankruptcy you still have legal title and you are protected.
If some of the payment is applied to the principal it is no longer a lease option it is an executory contract per Dodd-Frank. If we get far enough I’ll send you the section of law.
https://www.biggerpockets.com/forums/83/topics/105709-dodd-frank-and-lease-option
Seller-Financing Restrictions Under The Dodd-Frank Act
https://barneswalker.com/seller-financing-restrictions-under-the-dodd-frank-act/
How Dodd Frank Law Changes Seller Financing for Investors
https://www.biggerpockets.com/blog/2014-01-17-dodd-frank-law-changes-seller-financing-investors
Q. What kinds of houses do you have?
A. We focus on family homes that are 3 to 4 bedrooms and 2 to 3 baths in nice, safe family neighborhoods.
Q. What is the difference between a Lease/Option and Rent to Own?
A. In a Lease/Option you are not required to complete the purchase. In a Rent to Own, you generally have to complete the purchase. However, the two terms are used interchangeably by many people, so it is best to ask what the requirements are before you sign.
Q. What areas do you cover?
A. We cover all of Maricopa County AZ including Mesa, Phoenix, Tempe, Scottsdale, Chandler, Gilbert, Glendale, Peoria, Sun City, to name a few and Travis County TX, Williamson County TX, and a few other counties around Round Rock to Austin to San Antonio.
Q. Do I have to go to a bank?
A. No. Our approvals are based on Turnkey Fee and reserves. We do not need any bank’s approval, thusly, we can decide in a day or two rather than the several weeks they take.
When you do traditional financing and put 20% down you have to qualify for financing. This is for people who understand that is not a good idea. Also, you don’t get a tenant buyer when you put 20% down for traditional financing and the bank isn’t going to look for one for you. And if you are satisfied in getting $100 to $150 a month on a property and having CapEx, instead of getting $500 a month with no CapEx, then this isn’t for you. If you are happy getting a traditional tenant and paying for repairs and maintenance and paying for property management and turnover then this isn’t for you.
This is for investors who don’t want the hassle of bank financing so they can do an unlimited number of transactions without the bank saying “no”, once you have more than 4 properties. It’s for investors who want a large $20k to $25k down from the tenant buyer, investors who want the tenant buyer to do all repairs and maintenance, investors who want stability in their rentals with no property management fees, no turnover (and if it does turnover you get another $20,000 option fee.) Also, it isn’t sold to the tenant buyer for Zillow “Zestimate” it is sold to the tenant buyer for 5% or more above comps. The tenant buyers are willing to pay that because it gets them into a house. It means added equity for you.
Q. How long does it take to be approved once I decide on a Turnkey?
A. It generally takes 24 to 48 hours once we have decided to work together. And yes, I would prefer you drive the area to see if it fits your needs and see the Turnkey before we meet there.
Q. How much investment money do I need?
A. This is intended for investors who have money to place that is investment money. It is not intended to be monthly money that you depend on for groceries. If you buy one Turnkey you will learn some basic investing.
If you buy two Turnkeys you will be taught how to do these for yourself.
This is ideal for someone who wants to grow their portfolio to replace their current income.
Q. Why don’t I just get a mortgage from the bank?
A. You can, if you wish. But, a mortgage from a bank is not useful in this process. The few people who are being approved by bank lenders are finding that it is tougher to close than they thought and even some when “approved” are finding the bank withdrawing the “approval” just before closing. This is very disruptive for all involved. But if you think the bank will approve you, go for it. You will want a real estate agent and to start with the MLS at that point, instead of us since we do not accept bank mortgages in this process. This is a “cash” investment. Closings are done through escrow just like any other real estate transaction. You will own the property.
Q. How long does it take to get a Tenant Buyer?
A. For some houses I’ve had a tenant buyer in two weeks. But, I always allow a couple of months though. It takes time to clean it up and get it ready for occupancy. In most cases the tenants that are leaving need time to move their things. They would be making the payments until then. Your first payment wouldn’t be until they vacated. Finding someone to put down $20k is surprising easy. People have money, they just don’t have bank approved credit. The tenant buyer option price is whatever you and I agree on. I will recommend a number based on comps and supply and demand.
Q. Do I need a real estate agent?
A. No, but you may have one if you are willing to pay their fee. Once you have decided on a Turnkey the “closing” is done with an attorney to make sure all paperwork is done correctly.
Q. What do you need to know from me to get started?
- What do you want to accomplish ?
2. Do you invest full time or do you have a day job?
3. If you have a day job what is it that you do?
4. Are you wanting to replace a day job income with investments?
5. Where are you located?
6. How much money are you wanting to invest?
7. If you find the right opportunity what is your time frame for investing ?I respect my investors privacy as I would yours. I don’t give out investor’s information unless it is warranted. - I respect my investors privacy as I would yours. I don’t give out investor’s information unless it is warranted.
