Big payday-competitor no. 2- Chapter 7

A guy my age also got started in the rent to own business by accident. He tried, and tried, and tried, and tried to sell his home.

Then, he had a guy offer him $5000 down and to buy his home from him in 12 months.

He then had to move again, and same thing. He couldn't sell his home, and again, someone offer him a similar deal.

The third time he moved. He just advertised rent to own and had it sold the same day the ad hit the paper.

One thing I like about the way he does his rent to owns is he really doesn't care if he makes very much money over what his payment is. He will rent it to him for his cost, but he puts the lease option out 2 to 3 years.

He was telling me one month that he had two people exercising their option, and that he planned on making about $40,000 to $60,000 on the back end.

He was discouraged because now he would have to go find another home.

What a problem to have?

I like the fact that he isn't in a hurry to sell, and that his pay day is huge on the back end.

He also puts at least 20% down so he doesn't have to pay mortgage insurance. This definitely helps keep the payment low, and helps him build equity faster since he isn't quite so leveraged.

He now just buys a home that is bread and butter. "3 bedroom 2 bath, and at least a double car garage", but he gets a really good deal.

That is the key because you make your money when you buy.

He actually buys in the higher price ranges which I think isn't totally smart since most of your buyers are wherever the median home range is in your market. Currently in Bonneville county our median price range is about $154,000.

Then he finds the buyer.
BUYERS BUYERS BUYERS BUYERS BUYERS BUYERS
http://www.seidahohomes.com/

The competition number 1- Chapter 6

\I never have really had any competition in the rent to own business other than I have observed how other people do it, and I would like to share some of their strategies.

An older guy had quit his really high paying job working at the site. Let's call him Ed. He had developed software that he was trying to sell to people wanting to do rent to owns for $50 to figure rate of returns.

I kind of thought this was a silly idea, but maybe he will hit it big. Who knows?

He networked with bankers, and investors to get his leads. One bank in particular would give him about a deal a month. He would then take the people out with a realtor or to for sale by owners and pick the house that he thought was best.

What I like about his strategy is that he would say you pick a house, if I don't like it, I will pick a better one for you.

The couple of experiences I had with him, he did this very thing. The clients would pick a house he would say, I will only buy this if you pick this one over here, and explain why to them it is a better home.

He would do a 1 year, 2 year, or 3 year lease. He had more money and so he put more down. He would put down at least 20% which got him out of paying the mortgage insurance.

I emailed him several times saying he should become a realtor because then he would get paid 3% on top of that, but he was totally content with doing it the way he has done it.

He also thought that being a realtor and doing it the way he was doing it, was a conflict of interest.

I know from reading Robert Allen's real estate books that he kind of felt the same way.

I on the other hand have mixed feelings about that. See chapter 7.

burkebennett@hotmail.com

http://www.seidahohomes.com/

Working with my banker to fix their credit- Chapter 5

One thing I put in all my contracts was that they needed to work with my banker. Although, they can work with whatever banker they want, I like them to work with mine so I can track what is going on better.

Every month they pay their rent, I make a copy of the check and fax it to my banker. I also put a copy of it in their file.

The renters consult with him monthly to figure out what they need to do to raise their credit score high enough to buy the home.

Every one had a different story. Some had judgements they needed time to pay off. One didn't have any credit at all and needed to establish it.

A banker is really the key to not only funding your deal, but to figure out if a person is a good risk to take a chance on them to let them do a rent to own.

One thing that happened in the Fall of 07 is the sub prime market disappeared. That meant that you needed at least a 620 credit score to get financing all of a sudden.

What did this banking change do to the market?

All of a sudden, the bank wasn't giving loans to people with just a heart beat. They actually needed a 620 credit score.

Also, this exploded the rental market. More people now have to rent which pushed up rents.

This also helped expand my rent to own target market as I will explain in the following chapters.

Call KC Kuttler at 208 406 3834 to find out what type of loan you quality for and what is your maximum price range.

burkebennett@hotmail.com

http://www.seidahohomes.com/

Deal number 3- modifying the rent to own formula Chapter 4

Since the banks no longer did 100% financing, I knew that if I wanted to keep buying homes and making money that I had to modify my rent-to-own formula.

I played around with the numbers, and finally I decided that I would get a 90% LTV putting 10% down.

The next home I bought cost $118,384 with my closing costs of 3% rolled into the loan. I bought and sold the home the same day, putting a 12 month price at $125,000.

Because I had to put 10% down, I had to come up with $11,838. How and the heck was I going to do that?

The renters gave me $5000 of it, plus the first month's rent of $1100. I got paid $3551 in commissions for buying the home. This gave me $9651 right up front. I was only short $2187. I took the money from the other deal and put my 10% down.

Basically, I put down $2187 of my own money, with the potential of $6615 in gain in 12 months, plus the first month's rent of $1100, which is pure profit. Plus $185 per month in positive cash flow times 11 months for a total of $2035. Plus equity build up from paying the loan down of $100 per month times 11 for a total of $1100.

I invested $2187 of my own money to make about $10,850 or a 496.11% return!!!!!

Anyone else getting excited?

I help them get into a home that they couldn't buy. They get to pick it. I basically give them better terms than a hard money lender would, and everyone is happy.

burkebennett@hotmail.com
http://www.seidahohomes.com/

Coming up with a rent to own formula - Chapter 3

So I took the knowledge that I learned and modified it a bit. I started advertising on my website that I was going to try and buy as many homes as I could.

I told people that if they could put at least $5000 down, I would put down the rest. They would be able to pick whatever home they wanted.

They would be in charge of all the maintenance, utilities, and repairs. Just as if it were their own home.

Immediately my phone started ringing off the hook. Rent to own deal number two was on the way.

A small family wanted to buy a home. The agreed to put $5000 down, and pay $1100 per month on a home that I bought for $122,100 with my closing costs rolled into the loan, and immediately put the price at $130,000 12 months later.

I like the fact that people put down $5000 because that shows me they have some skin into the game.

I bought and sold the home the same day using a lease purchase contract with the option to buy.

It was a good deal for them because they couldn't buy a home any other way. It worked out for me because I got paid $3660 in commission just for buying the home. They gave me $5000 option money, and the first months rent of $1100. Also, equity pay down was actually about $100 per month times 11 months, even though it was an interest only loan. Not sure how that happened.

This comes to $10,860 right from the get go, with no money down.

Have you ever created money out of thin air?

Can anyone tell me what my rate of return is where I invested zero to make $10,860?

Holy crap Batman! I thought I was onto something.

I got a 100% interest-only loan. This was one of the last interest-only loans they offered. The reason I know that is that when I went to make my first payment, the bank had already gone bankrupt.

Life was starting to look really good for me.

Looking back on this deal, I basically screwed up on how I wrote it up.

I put into the contract that I would pay my part of the closing costs, such as title insurance and split half the closing costs.

This, my friend, is stupid because--didn't I just buy the home and pay for all my closing costs when I bought the home? Why would you pay the same costs twice?

I learned from this mistake, and now I have the buyer pay all of the closing costs. After all, it is their home if they exercise their option.

The faster they buy the home, the better deal they get with the title company because everything can be prorated and they will give them a better deal because of the quick turn around.

burkebennett@hotmail.com

http://www.seidahohomes.com/

Expanding my education- Chapter 2

About the time I had done this, my neighbor introduced me to a company called Nouveau Riche.

(If you want to get really smart in real estate really fast, contact me and I can help you sign up for it. 208-589-5599 Burke Bennett)

I signed up at the time because I wanted to learn how to do short sales since I didn't understand them at the time.

When I went to college down in Arizona, I took 6 days worth of classes.

I had been a realtor for over 6 years, but learned so much that it was like drinking from a fire hose.

I took a class from a guy named Chris Wilson. I was impressed that he had over 150 lease option homes.

One of the things he would do is buy his homes at a discount. He would make them put $10,000 the first year, and $5000 the second year. This $15,000 was option money. The soonest the renters could exercise the option was after they put the $5000 down in the second year, but they had up to 24 months to buy the home.

He would have them fill out a renter's agreement, and have a separate option agreement.

Renters were responsible for all maintenance, utilities, and repairs.

He then would pick a price in the future of what the home might be worth.

If the renter didn't buy the home, he kept their $15,000, plus all the rent, plus any appreciation of the home he might have enjoyed, not to mention all the tax write-offs.

If they bought the home, he would 1031 his gain into two more homes and never have to pay taxes on the proceeds.

I liked what he was doing and thought, "I could be the Chris Wilson of SE Idaho," but I knew it wouldn't fly in SE Idaho, so I made some adjustments.

burkebennett@hotmail.com

http://www.seidahohomes.com/

I stumbled onto the rent to own market by accident. Chapter 1

SE Idaho was enjoying a huge building boom. One day I decided that I was going to build a home. I had a builder who promised me that I would get a good deal. When he was done building the home, my cost just to cash him out was $162,000.

I was a little distraught since I would probably have to hire a realtor to sell my home. The home only appraised for $182,000. When you are making payments on a home, it doesn't take very long for that profit to be eaten up.

So I was trying to sell the home. I reluctantly offered a 2.5% commission to a buyers' agent. By the time I paid a realtor, got my own financing, and paid all the interest on this home, my commission was going to be about zero.

My home just sat there.

I was really starting to stress. Why would I borrow about $165,000 to maybe make $3000--that is-- if I was lucky after all my costs?

A guy from Utah came and said that he was trying to workout some of his business debt, but he would pay me the first 6 months rent of $1300 per month up front and put $5000 down on the home.

This gave me $12,800 right up front. I remember thinking to myself, "What a great human being to bail me out of my situation."

I was excited. He said that he would pay be $185,000 for it in 12 months which was $3000 more than I had it listed for.

Holy cow! I was pumped.

As a realtor, I was used to seeing $3000 commissions, but not $12,800 in one pop.

So 6 months went by and then he started paying me $1300 per month on rent.

I thought to myself, "Good heck this is easy money!" My payment was only $1140, and he is paying me $1300.

I never had to beg for this money. He paid it promptly.

As the 12 month mark rolled around, I started to get cocky and said that he either needed to buy the home, or I was raising the rent to $1800 per month.

After all, no one would walk away from $5000. Plus this guy had put in a lawn and partially finished the basement.

This story is to be continued.

burkebennett@hotmail.com
http://www.seidahohomes.com/