If you missed Thursday’s meeting, you missed out…
First of all, there seems to be alot of interest in lease options and how they work. There are some investors who buy single family homes, rehab them and then lease them with the option to buy within a specified amount of time. One of the original gurus Lou Brown taught this for a long time. Usually, there are 2 contracts in place.
The first is the option contract. Typically with an option contract, there is a non-refundable deposit that the buyer will need to pay to move into the property. Which, of course means that if they choose, after the term of the contract, not to buy the property, they forfeit their deposit. Typically, if they do decide to go through with the sale, the deposit is counted towards the down payment on the house.
The second contract is a traditional lease contract or rental agreement. This will protect the investor in the event the person damages the property or violates any traditional provisions in a rental agreement. Be sure to check with your lawyer regarding how to set up both contracts. We are having Attorney Karen Guthrie speaking on July 16th on Landlord/Tenant guidelines and issues. She is an expert on rental contracts for MA and I will ask her to cover lease option contracts as well.
Some investors are setting up a lease option contract to purchase a home. These contract terms tend to be longer than when an investor rents the property to the renter who will live in the property. They may include the ability to get the property in rentable condition, if it’s not already in shape to do so, then they rent the property for a higher rate than they are leasing the property for and they simply collect the rents, pay their lease amount and they collect the cashflow. This may be possible, when the seller is in a position where they are having difficulty selling the home and for a variety of reasons they have to move, such as job relocation, they can no longer afford their mortgage because of job loss or any number of other reasons. It’s all about finding out what your seller’s issues are. Where are that at, where do they want to be and how can you help them make a change to get what they want or need, so that you can take possession of the property. The investor must include the ability to lease the property to a 3rd party.
Now, if you missed the meeting on Thursday, you missed out…Brownstone RG sent a panel of investors to discuss deals, how they got involved, their most successful ways to source deals and more. Chris Moniz, Brownstone’s Controller and Head of New Construction, Chris Chapin, Brownstone’s Marketing Director and Senior Project Manager, Kim Kelleher, Retail Agent and Project Manager and JV Partner Jerry Lima were on the panel and they all had golden nuggets to share.
My favorite take away was from Jerry Lima. He began partnering with Brownstone 8 months ago. He as an administrator for the special ed department of a high school and was going through alot of changes in his life. He said, ”I decided that I had to take a chance on me and Brownstone, I decided to believe in myself and that was the first step.”
I asked what they all found was their most successful ways to source deals. Unanimously they said that it was all about networking. Networking at meetings like Boston AREIA, of course. But, networking everywhere they go. Talking to the guy who makes your sandwhich, the girl who does your nails, your police department, your fire department and your friends and family. I asked them what they suggested new investors should say to people and after everyone gave suggestions, it really boils down to letting the people you are networking know that you work with a team of seasoned investors, who can close quickly and if those people bring them a deal and it closes, they will get paid. So, make sure you tell everyone to keep their eyes open and when a property closes, you will pay them $1000 finder’s fee. After they’ve made $1000, you’d be surprised how many deals they send your way. LOL.
Chris Moniz wanted to make sure that folks know how to get a deal done, finding it is one of the most important parts, but, know how to run your numbers. Work backwards, start with the ARV, subtract the rehab costs including the cost of funding and commissions the rehabber will want to earn, holding costs, taxes and transfer fees, wholesale and agent commissions as well as a contingency budget to get to your maximum allowable offer. He also said, if you are the rehabber, know how to bring the project to completion or partner with a team who does.
So, believe in yourself, network like crazy, know the steps of bringing or project to completion or partner with a team who does and take action….sounds like a solid plan all around. I am all about partnering on a personal level. I know what I’m good at and what I’m not good at…so, I’ll add know your strengths, but, more importantly know your weaknesses and surround yourself with people who complete your skill set.
Latly, we are having a summer promotion saving new members and those renewing $25 on an individual membership and $50 on a joint membership. You will see the summer promotion after you’ve chosen the membership and completed the information page, you will be given an option to choose the membership plan, be sure to scroll down and choose the summer special, it reflects the discount. This promotion is going on through June 30th. So be sure to act today.
See you at the next meeting, Bernadette, Boston AREIA Chief Connector