Another Facelift

This is a duplex I bought in the late 90s … it was aluminum siding — still is — but was looking a little tired, to say the least. I recently sold it on a land contract to a wonderful family, who started making improvements immediately.¬†FSCN0518IMG_2874

Take a look at this exterior before and after! They’re not quite done, but they’ve replaced some windows, made it into a single family home by opening up the downstairs living area, replaced the front door, and repaired and painted the siding and brick front porch. They also tore out the old shrubbery and put in new plants. They put a big vegetable garden in back.

This home is over 100 years old, but is built better than many of our newer homes today.

These people wouldn’t have been able to purchase a home the traditional way, as they have no credit and the banks have tightened the purse strings so much.

They gave me a large down payment and I didn’t charge them much for the home … they’ll own it within the next couple of years. They’re enjoying the pride of home ownership, and I’m so happy to have helped them achieve this dream … we’ll definitely maintain a relationship going forward. ūüôā

Rent to Own?

Seller financing, rent to own, land contracts … these are creative ways to achieve homeownership if you can’t¬†qualify for a mortgage.¬†As a real estate investor here in Indy, I’ve sold a few of my rentals this way. It can¬†be a positive route for both the seller and buyer.¬†Laura Agadoni included me as one of her sources in the following¬†Trulia article about seller financing. If you —¬†or someone you know —¬†is¬†in the market for this type of financing,¬†her piece is a good way to get familiar with the process:

http://www.trulia.com/blog/pros-cons-seller-financing/

Personally, I enjoyed giving people the opportunity to become homeowners when they wouldn’t otherwise be able to do so. For the most part, they took excellent care of the properties, knowing the home was “theirs.” I even had one family make multiple repairs and updates as they moved through their contract.

The downside was that occasionally, tragedy strikes. People get sick, lose their jobs, split with their spouses, etc. But as I stated in the article above, they usually just “bow out” gracefully and apologetically, pack up, clean up, and leave. The seller keeps the down payment, and moves on.

Bottom line? As Laura states, seller financing can work well for everyone. The seller earns good interest on the loan, and the buyer achieves the American Dream … home ownership. It’s a win/win. ūüôā

 

 

 

Rent-to-Buy Gone Wrong

A rent-to-buy, or land contract, is a great way for someone with less than stellar credit — or even no credit — to buy a home.¬† I’ve done a few of these over the years and for the most part it’s been a good thing.

The buyer gives me a down payment, at least $1,000, and I work out payments over a set period of time.¬† I include interest, property tax and insurance in these payments.¬† Interest is 10%.¬† I know, that’s a lot, but since these people are higher risk, they understand the reasoning behind the high interest.¬† And I make the payments within their budget.¬† We discuss this beforehand.

I’ve had three buyers default.¬† One got in an argument with his boss of six years and quit.¬† Another had a major health problem resulting in high medical bills, and couldn’t continue to make payments.¬† 95% of the time, when people can’t pay, they just quietly admit it and leave.¬† They feel badly and know they must vacate.

On just one occasion, I had a buyer default and not leave.¬† He decided to stay to the bitter end, so I had to enlist the help of my real estate attorney and file foreclosure on him.¬† The process took about three months and cost me $600 in fees, but I got him out.¬† Unfortunately, the buyer owed meabout $2400 in payments by the time it was all said and done.¬† So, I’m glad I got a $2,000 down payment from him up front!

Also, he really disappointed me in the way he left the house.¬† Here’s some video I took after he left:

As you can see from the video, he not only left it a mess, he also took (stole) some things.¬† Frustrating, yes, but you can’t worry about the stuff you can’t control.¬† So I moved forward, and rented this home out to a wonderful guy who now wants to buy the place.¬† It worked out.

Doing a rent to buy is a great way to make money for yourself as a real estate investor, and to provide housing for people who can’t buy a home in the traditional way.¬† It’s worth checking into . . .

Hoarder Alert!

I’m just soo glad I have a well-developed sense of humor.¬† In my job, I often need it.¬† Here’s a case in point.¬† My tenant Martha is buying a double from me¬†through a¬†land¬†contract, i.e. rent-to-buy.¬† Land contracts are a nice addition to real estate investing plans.¬† ¬†Normally, this is a great way for people who have bad credit, or no credit, to purchase a home.¬† Now, I didn’t know Martha five years ago when a friend recommended her to me.¬† But boy, do I know her now.¬† And I’m afraid she has hoarder tendencies.

She’s good about paying me on time — no complaints.¬† But the inside of her¬† house is filled with “stuff” and the outside — well, one person’s trash is another person’s treasure, right?

I got a call from the Board of Health last week about her back yard.  (Uh-oh . . .)  I went down there immediately and took this picture:

Yikes!¬† That contraption is actually a “dog house” for her little dog, but she had filled it with bags of garbage.¬† (I didn’t bother to check to see if the trash can next to it was empty.)¬† It’s hard to tell from the picture, but there was also trash and junk to the right of it.¬† I was really unhappy about this — I’d be the one to get slapped with a hefty fine if the situation wasn’t remedied within about 10 days.¬† I had a “talk” with my tenant and she cleaned it up to this extent:

So I’ll be having a more detailed discussion with her tomorrow.¬† I don’t think the Board of Health will feel she’s in compliance at this point.¬† At least the garbage is gone.¬† She’s moving in the right direction.

But if she can’t do a better job of maintaining the property I’ll have to begin the foreclosure process.¬†¬† (This is why landlords should always put clauses in their leases and contracts that allow them to evict if the property isn’t maintained to a certain standard.) ¬†It’s more expensive and involved to remove a rent-to-buy tenant than a regular renter.¬† Even though she’s good about paying on time, that’s not enough . . . I don’t want to become best friends with the Board of Health folks because of her!

Onward and upward . . . More later . . .