Lease Purchase VS Sale
Lease Purchase VS Sale
What is a LPO (lease purchase option) and how can it help me? An lpo is a great idea for any real estate investor. You an make extra money and pay less taxes by leasing a property instead of selling it. You do not have to even own a property to lease it. The first thing you need to do in order to lease a property is find out how much you need down and how much you need per month. Most investors want around 10 percent down and a couple hundred dollars per month profit. I normally lease a house that I know will be hard to get someone qualified or I don't really want to take a profit right away. The typical person who tries to buy a house via lpo does not think that they will qualify for conventional financing. I think the most important thing in considering a person for an lpo is how much they make per month and how long they have been on their job. I also look at the rental history of the person and how long they have lived in the area. Give your customer at least 2 years to convert the lpo and let them know that the home will appreciate every year for them and the price on the contract is what they will pay no matter what the market does. It should be easy for the leaser to get qualified if they make at least 12 payments on time via check or money order. Most banks view a 12 month lpo as a refinance instead of a purchase, therefore you can put someone in your property, charge them a premium and play the odds on them even being able to fill the contract. Here is how an lpo works:
Buyer signs at least 2 year lpo and puts down at least 10 percent (non refunable)
Buyer is responsible for all maintaining, taxes, insurance (get proof)
Buyer has a finite time to execute contract and if they cannot, they forfeit the down payment and have to either sign another lpo or vacate the property. Do not make the lpo assignable or transferable.
How can I make money off an lpo without home ownership? You can control a piece of property by simply leasing it from the owner and assigning it to another person. Here is an example:
Home owner wants out of the property now.
Real estate investor gets them to sign an lpo
Investor has them vacate property and make it look presentable
Investor now finds a person to sub lease the property from them. You get the same out of this as if you owned the property.
Investor collects the monthly rent and pays Home Owners Mortgage.
Here are the pitfalls:
Home Owner goes bankrupt (check your state)
Leaser damages property.
The advantage of this type of lpo is that you have almost nothing to loose. If you cannot find someone to lease the property or the leaser does not pay the payments, you keep the down ayment and via the lease agreement you contact home owner and let them know that you are canceling the lpo. Remember that if the seller is motivated, you will not have to put anything down and sometimes you can even get them to pay you.
posted by rob @ 5:05 PM 0 comments
Sunday, November 05, 2006
The After pics
Go to this link to view the after photos
http://rehabpicsafter.blogspot.com/
posted by rob @ 2:54 PM 0 comments
Thursday, November 02, 2006
Rehab pics BEFORE
here is a link to some pictures of a before rehab
http://rehabpics.blogspot.com/
posted by rob @ 10:24 AM 0 comments
Wednesday, November 01, 2006
Is networking important for rehabers?
Ask any rehaber and they will tell you that they get a lot of their houses from other rehabers in their network. Most new rehabers ask why would someone giveaway a property that will make money. The answer to this question is very easy, it takes about 20 offers to get one good house. What happens when you get 3 or 4 out of 20 offers? Lets say that you have been in the business several years and you have 4 houses, what would you do if you could not get to all those houses? Would you turn down a good deal or would you buy it and flip it to another investor for a little profit. Most investors only work on 1 or 2 projects at a time, the other houses they own can be easily flipped to other investors for a quick profit. I usually price my flip to investors cheap because it is so much easier to sell to a pro. It is easier to sell to a pro because they know that numbers are all that matters and if they know the project will make them money, they will cut you a check. I usually do not let the investor know what I paid until the deal is done. Most investors do not care how much profit you make as long as they know you are not taking advantage. Remember the most important thing about networking is to not try and kill the buyer, because one day you will probably buy from them.
posted by rob @ 8:29 AM 0 comments
Monday, October 30, 2006
Great Free Sites
Great Free Sites
Where do you start finding rehabs? The internet is full of great information and some of it is free. Here is a list of sites I use almost everyday.
http://www.rehablist.com
This site is great. You can sign up free of charge and get fresh rehabs sent right to your email. This is also a great networking tool.
http://www.realtytrac.com
This site gives a free 7 day trial, but after that it is pretty expensive. I would sign up for the free trial and see if you like it enough to keep it. The one negative is that most investors know about this site.
http://www.realtracs.com
This site is great if you are in the Nashville Tennessee area. It shows you listings of all MLS houses.
You can search MLS listings in your site and find out your free site alternative. Set yourself up with automatic email notifications of any house that is listed in your specific price range.
http://www.lowratebroker.com
This site will find your customer or yourself the best rate on a new mortage or refinance. You can get a potential buyer to go to the site and get pre approved, so you do not waste your time on someone who is not qualified.
posted by rob | 9:32 AM | 0 comments
Friday, October 27, 2006
Finding your comps
How do I know how much a potential real estate investment is really worth?
In order to make a profit off of a real estate investment, you will need to first find out how much your property will be worth after fixup. There are a few ways to find out your potential investments worth:
Professional appraisal
Tax records
Recent comparible sales (comps)
internet sites like www.zillow.com
The first way on the list is a professional appraisal, this is the most accurate, but it can cost up to $400 for this service. Tax records are a good place to start, but they are usually 10 to 25% below the MARKET VALUE of the property. Comps are great and most real estate agents will give you a list of comps or let you know the approximate cost per square foot in the area. Internet sites like zillow are a great place to start your research on a potential investment, but do not make this your decision maker. I recommend getting comps and if you cannot find any comps within a 6 month period it is possible you will have a long selling cycle.
posted by rob | 2:36 PM | 0 comments
Loan to Value
Loan to value
How much will the bank loan me to fix up an investment property?
Banks are willing to invest in a piece of property if they believe that it will be worth more than the acquisition price and fix up. Most banks will only loan a percentage of the subject to appraisal. The percentage of value for most banks on construction loans is between 75 and 90 percent. The loan to value ratio of your bank is very important. As an investor, you will need money for the property and all expenses incurred for fix up. Most investors try and keep 10 percent of the loaned money as front end profit. Here is an example of a typical flips numbers:
Property cost 50k
fix up cost 14k
subject to appraisal 100k
bank loan to value percentage 80%
In this situation, you will have an up front profit of 16k. You will need to keep out money for interest payments and other costs.
For loan information go to http://www.lowratebroker.com
posted by rob | 2:34 PM | 0 comments
Home Inspections
Home Inspections
If you are new to real estate investing, a home inspector can really be a great tool. Flipping a house can be very profitable, but there are several things that you will need to inspect before you buy a possible investment property. If this is your first flip, you will definitely need to get an inspector if you are not sure about the following things:
Electrical wiring
Plumbing
Mold
Water damage
Foundation
Roof
Flooring
The items listed above can be very expensive if there is a major problem. Most real estate investors will crawl under the house and inspect it for everything on that list. If you are going to use an inspector, make sure they are licensed and have been in business at least 2 years. Most investors use an inspector that deals mainly with rehabs. Inspectors are not very expensive, but they are worth it if they find a major problem. When considering your first flip, know your limitations and call in an expert when you are not sure about something in the house that may be very expensive to fix. If you miss a foundation problem, you may have to pay 4 to 5 thousand dollars just to get it up to code. The biggest problem with everything on this list except the roof is that it does not really ad value to the house if you have to fix the problem. Every real estate venture that you do will lower your dependence on experts. One important tip is to stay with the inspector while they do your property. If you stay with the inspector and ask questions, you can learn how to do it yourself.
posted by rob | 2:32 PM | 0 comments
Monday, October 16, 2006
Is The Real Estate Market Getting Worse?
New mortgage applications dropped even though interest rates dipped to a 6 month low this week. This week applications are over 20% below this same time 1 year ago.Some experts are saying the overall momentum for the real estate market is definitely downward and possibly entering a recession.
As we all know, extremely low mortgage rates sparked the housing boom, but the recent plunge in mortgage rates did not motivate consumers to take action. Some real estate markets that have seen some of this volatility are Northern Michigan Arenac County, Las Vegas, Nevada and the Bay Area, Laguna Beach and San Diego in California.
Will the Federal Reserve cut rates again?
As the Unites States housing market slows to a crawl, it may also negatively affect the overall economy. The Federal Reserve will have a tough decision to make. Short-term interest rates may have to be cut instead of increased.
In addition, the Federal Reserve also has concerns about inflation. Rates may need to be lower sooner than expected, but how will that affect the real estate market?
The National Association of Realtors said existing home sales fell for a fifth straight month in August. Also home sale prices dropped from the previous year. This has not happened in 11 years.
There are also other reports indicating strength in the U.S. real estate markets. The Commerce Department said sales of new U.S. homes rose in August. New single-family dwelling home sales increased 4.1 percent in August from a downwardly revised July rate
What is a LPO (lease purchase option) and how can it help me? An lpo is a great idea for any real estate investor. You an make extra money and pay less taxes by leasing a property instead of selling it. You do not have to even own a property to lease it. The first thing you need to do in order to lease a property is find out how much you need down and how much you need per month. Most investors want around 10 percent down and a couple hundred dollars per month profit. I normally lease a house that I know will be hard to get someone qualified or I don't really want to take a profit right away. The typical person who tries to buy a house via lpo does not think that they will qualify for conventional financing. I think the most important thing in considering a person for an lpo is how much they make per month and how long they have been on their job. I also look at the rental history of the person and how long they have lived in the area. Give your customer at least 2 years to convert the lpo and let them know that the home will appreciate every year for them and the price on the contract is what they will pay no matter what the market does. It should be easy for the leaser to get qualified if they make at least 12 payments on time via check or money order. Most banks view a 12 month lpo as a refinance instead of a purchase, therefore you can put someone in your property, charge them a premium and play the odds on them even being able to fill the contract. Here is how an lpo works:
Buyer signs at least 2 year lpo and puts down at least 10 percent (non refunable)
Buyer is responsible for all maintaining, taxes, insurance (get proof)
Buyer has a finite time to execute contract and if they cannot, they forfeit the down payment and have to either sign another lpo or vacate the property. Do not make the lpo assignable or transferable.
How can I make money off an lpo without home ownership? You can control a piece of property by simply leasing it from the owner and assigning it to another person. Here is an example:
Home owner wants out of the property now.
Real estate investor gets them to sign an lpo
Investor has them vacate property and make it look presentable
Investor now finds a person to sub lease the property from them. You get the same out of this as if you owned the property.
Investor collects the monthly rent and pays Home Owners Mortgage.
Here are the pitfalls:
Home Owner goes bankrupt (check your state)
Leaser damages property.
The advantage of this type of lpo is that you have almost nothing to loose. If you cannot find someone to lease the property or the leaser does not pay the payments, you keep the down ayment and via the lease agreement you contact home owner and let them know that you are canceling the lpo. Remember that if the seller is motivated, you will not have to put anything down and sometimes you can even get them to pay you.
posted by rob @ 5:05 PM 0 comments
Sunday, November 05, 2006
The After pics
Go to this link to view the after photos
http://rehabpicsafter.blogspot.com/
posted by rob @ 2:54 PM 0 comments
Thursday, November 02, 2006
Rehab pics BEFORE
here is a link to some pictures of a before rehab
http://rehabpics.blogspot.com/
posted by rob @ 10:24 AM 0 comments
Wednesday, November 01, 2006
Is networking important for rehabers?
Ask any rehaber and they will tell you that they get a lot of their houses from other rehabers in their network. Most new rehabers ask why would someone giveaway a property that will make money. The answer to this question is very easy, it takes about 20 offers to get one good house. What happens when you get 3 or 4 out of 20 offers? Lets say that you have been in the business several years and you have 4 houses, what would you do if you could not get to all those houses? Would you turn down a good deal or would you buy it and flip it to another investor for a little profit. Most investors only work on 1 or 2 projects at a time, the other houses they own can be easily flipped to other investors for a quick profit. I usually price my flip to investors cheap because it is so much easier to sell to a pro. It is easier to sell to a pro because they know that numbers are all that matters and if they know the project will make them money, they will cut you a check. I usually do not let the investor know what I paid until the deal is done. Most investors do not care how much profit you make as long as they know you are not taking advantage. Remember the most important thing about networking is to not try and kill the buyer, because one day you will probably buy from them.
posted by rob @ 8:29 AM 0 comments
Monday, October 30, 2006
Great Free Sites
Great Free Sites
Where do you start finding rehabs? The internet is full of great information and some of it is free. Here is a list of sites I use almost everyday.
http://www.rehablist.com
This site is great. You can sign up free of charge and get fresh rehabs sent right to your email. This is also a great networking tool.
http://www.realtytrac.com
This site gives a free 7 day trial, but after that it is pretty expensive. I would sign up for the free trial and see if you like it enough to keep it. The one negative is that most investors know about this site.
http://www.realtracs.com
This site is great if you are in the Nashville Tennessee area. It shows you listings of all MLS houses.
You can search MLS listings in your site and find out your free site alternative. Set yourself up with automatic email notifications of any house that is listed in your specific price range.
http://www.lowratebroker.com
This site will find your customer or yourself the best rate on a new mortage or refinance. You can get a potential buyer to go to the site and get pre approved, so you do not waste your time on someone who is not qualified.
posted by rob | 9:32 AM | 0 comments
Friday, October 27, 2006
Finding your comps
How do I know how much a potential real estate investment is really worth?
In order to make a profit off of a real estate investment, you will need to first find out how much your property will be worth after fixup. There are a few ways to find out your potential investments worth:
Professional appraisal
Tax records
Recent comparible sales (comps)
internet sites like www.zillow.com
The first way on the list is a professional appraisal, this is the most accurate, but it can cost up to $400 for this service. Tax records are a good place to start, but they are usually 10 to 25% below the MARKET VALUE of the property. Comps are great and most real estate agents will give you a list of comps or let you know the approximate cost per square foot in the area. Internet sites like zillow are a great place to start your research on a potential investment, but do not make this your decision maker. I recommend getting comps and if you cannot find any comps within a 6 month period it is possible you will have a long selling cycle.
posted by rob | 2:36 PM | 0 comments
Loan to Value
Loan to value
How much will the bank loan me to fix up an investment property?
Banks are willing to invest in a piece of property if they believe that it will be worth more than the acquisition price and fix up. Most banks will only loan a percentage of the subject to appraisal. The percentage of value for most banks on construction loans is between 75 and 90 percent. The loan to value ratio of your bank is very important. As an investor, you will need money for the property and all expenses incurred for fix up. Most investors try and keep 10 percent of the loaned money as front end profit. Here is an example of a typical flips numbers:
Property cost 50k
fix up cost 14k
subject to appraisal 100k
bank loan to value percentage 80%
In this situation, you will have an up front profit of 16k. You will need to keep out money for interest payments and other costs.
For loan information go to http://www.lowratebroker.com
posted by rob | 2:34 PM | 0 comments
Home Inspections
Home Inspections
If you are new to real estate investing, a home inspector can really be a great tool. Flipping a house can be very profitable, but there are several things that you will need to inspect before you buy a possible investment property. If this is your first flip, you will definitely need to get an inspector if you are not sure about the following things:
Electrical wiring
Plumbing
Mold
Water damage
Foundation
Roof
Flooring
The items listed above can be very expensive if there is a major problem. Most real estate investors will crawl under the house and inspect it for everything on that list. If you are going to use an inspector, make sure they are licensed and have been in business at least 2 years. Most investors use an inspector that deals mainly with rehabs. Inspectors are not very expensive, but they are worth it if they find a major problem. When considering your first flip, know your limitations and call in an expert when you are not sure about something in the house that may be very expensive to fix. If you miss a foundation problem, you may have to pay 4 to 5 thousand dollars just to get it up to code. The biggest problem with everything on this list except the roof is that it does not really ad value to the house if you have to fix the problem. Every real estate venture that you do will lower your dependence on experts. One important tip is to stay with the inspector while they do your property. If you stay with the inspector and ask questions, you can learn how to do it yourself.
posted by rob | 2:32 PM | 0 comments
Monday, October 16, 2006
Is The Real Estate Market Getting Worse?
New mortgage applications dropped even though interest rates dipped to a 6 month low this week. This week applications are over 20% below this same time 1 year ago.Some experts are saying the overall momentum for the real estate market is definitely downward and possibly entering a recession.
As we all know, extremely low mortgage rates sparked the housing boom, but the recent plunge in mortgage rates did not motivate consumers to take action. Some real estate markets that have seen some of this volatility are Northern Michigan Arenac County, Las Vegas, Nevada and the Bay Area, Laguna Beach and San Diego in California.
Will the Federal Reserve cut rates again?
As the Unites States housing market slows to a crawl, it may also negatively affect the overall economy. The Federal Reserve will have a tough decision to make. Short-term interest rates may have to be cut instead of increased.
In addition, the Federal Reserve also has concerns about inflation. Rates may need to be lower sooner than expected, but how will that affect the real estate market?
The National Association of Realtors said existing home sales fell for a fifth straight month in August. Also home sale prices dropped from the previous year. This has not happened in 11 years.
There are also other reports indicating strength in the U.S. real estate markets. The Commerce Department said sales of new U.S. homes rose in August. New single-family dwelling home sales increased 4.1 percent in August from a downwardly revised July rate
posted by Rob warner | 3:54 PM
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