Coach Mitch’s REFLECTIONS™
In hard times, people try harder
When economic times are hard, we are all trying harder to be creative, to be flexible, to make something out of nothing, or to stretch the little we have into something that can be used.
I was trying to rent a house. It’s one of my keeper properties. I’ve had it for a long time and it does pretty well.
One day I got a phone call from a mortgage originator with whom I had dealings. He had a new program that he wanted to speak to me about. It seems that mortgage brokers are also hurting and they are scrambling to get monies.
The mortgage originator’s firm had come up with a novel idea, at least it was novel to me. They would take a mortgage applicant who had been turned down for a mortgage, find a house that they liked, arrange for a lease with an option to purchase, for a fee, of course, wait for the credit to be better, and then get them a mortgage.
The mortgage originator sent over a very nice couple. The email below is my response, after having read the proposed lease option.
My response to original message
From: Mitchell Goldstein [mailto:coachmitch(at)coachmitch(dot)com]
Subject: RE: lease option
Thank you for the information. As I understand it, Realty Funding gets an assignment fee, $5900 in the example, and I get nothing for giving an Option. In addition, I have to give a credit of the $5900 plus a rental credit of $100 per month.
I presume that Realty Funding keeps the $5900 fee should the renter default. I also presume that I would get none of the fee should the renter default. I further presume that Realty Funding will not pay the damages the tenant leaves behind. This last point is interesting; I get the first month’s rent and two months security, a total of $3675. Where will the tenant/optionor get the money for this if they pay Realty Funding an Assignment Fee?
An option is a legal agreement that is in addition to the lease. There is a cost for the ability to tie up a property. Why would I tie up my property and get nothing for that privilege? I have rented this property out, successfully, for 19 years. When I sell, I can hold the paper myself.
I don’t need your funding company in order to sell. If I were to do an option, then I should get the option fee. Any rental credit should be on top of the regular fair market rental. You know that is the proper way to do a rental credit. Any fee that Realty Funding can exhort from the applicant they are welcome too – as long as I do not have to give a credit for it.
I might be persuaded to allow for the Realty Funding credit were the appraisal high enough. However, that cannot be predicted with any surety. In any case, if the market goes down, the selling price also goes down. No bank is going to give a loan on a property that does not appraise at the optioned/purchase price.
My current lease allows me to sell the property at any time, without penalty. It also calls for the tenant to pay for the first $500 of repairs. Since I already have a requirement that the tenant do repairs in my lease, that you have it in your lease is of little added value. In addition, I allow pets, which is an attractive point.
There are currently only two homes for rent in the N Colony School district, reputed to be perhaps the best school district in the Capital District. The systems in the home are almost new. My capital investments have already been made, including updated plumbing, electric and flooring, a new furnace, appliances, windows, and roof.
I recognize that the home needs certain work, like siding and a dormer. Those items are not likely to stop a sale to a first time buyer who can qualify for a starter home. I would like to work with you, but Realty Funding needs to be realistic. There is some value in Realty Funding providing the tenant/buyer, however, were I to place an ad, “Must sell. Will hold mortgage.” I believe that I will get more than enough calls.
Let’s talk further. Perhaps something can be accomplished.
Mitchell Goldstein – Coach Mitch
This was the answer
Then our Program is not for you.
Our program is for houses that are not selling (not renting usually).
We offer an Owner instant monthly cash payments. This is important for Someone in Cleveland that has a new job and new home and is still paying mortgage, taxes, insurance and heat on the old house. Less than HALF the people that could get mortgages can get them now.
Our program is very attractive to those people and maybe not to a hands on guy that is local.
What may be attractive to you is what I just sent in another e-mail.
Send me your rejects and overloads and if I make a deal with them, You get a third of Realty Funding’s Fee. I have a few people out looking for homes (that’s is how I found yours) and they get a third also. So you see, I only get one third of the fee also. It is all explained on the web page under the “Realtors” button. No mystery meat here!
You see things differently than most people. Most people do not want the headaches of rehab and then renting.
Be creative yourself when renting or selling
Using this model, if you have a home that you must rent or sell, then advertise in Cleveland, find someone who is moving to your area, and who has a home of their own that would be available. Allow them to move into your home in an advantageous way. Then, offer to help them find someone who will lease option their home. Everyone wins.
See Coach Mitch’s “Ridiculously Simple System…” ™ for details.
See you at the top,
518-439-6100 until midnight EST