Tag Archives: lease option

My Day Job – Kind Of

18 May

While I’m working at making my living online, and hopefully giving you ideas to do the same, I have a day job.  Not a traditional day job that I commute and go to an office to do.  I am a licensed real estate agent.  You can google me and find me easily.

During the eight years I’ve been licensed here in Las Vegas, I’ve witnessed the growing bubble, the bursting bubble and the continually deflating market.  Las Vegas has been ground zero for real estate disasters.  Housing prices went absolutely insane between 2004 and 2007.  Then, pop! Image

Prices started to fall like a penny dropped off a skyscraper.  Everyone kept wondering how long could prices possibly continue to fall…..how long, well we’re still wondering if we’ve hit the bottom.  In fact, if you were waiting for the bottom, you may have missed it.

The bigger issue is now that we have no houses to sell.  The government decided to help home sellers and in Nevada they passed a law stating that banks had to prove they had the right to foreclose on a house before they could file the paperwork to do so.  Well, banks have notes that were sold several times and they have no idea where that paperwork really is or if it was ever generated, giving them the legal right to take a property back.

This has caused our market, like many others, to come to a screeching halt. In a city boasting just under 2 million residents, there are only 3900 houses to choose from priced from $15,000 to $18 million, and about 25% of those are priced at a $500,000 or less.  Las Vegas has just announced that the unemployment rate is under 12%, lower than its been since 2009.  So lower unemployment means people want to buy houses but there are very houses for them to choose from.

I tell you this because if you’re looking for a house in this market, and it feels right to you, you better put an offer on it today because 20 more people think its right for them too.  Houses are back to receiving multiple offers and prices are starting to creep up (at least for houses priced under $200,000).

So if you’re looking for a house, and you see one that mostly makes your heart pitter patter, whether its a traditional sale or you need terms like lease option or owner carry, don’t wait.  With so few houses to choose from, everyone is looking for the same thing you are.  Don’t let it get away.

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Lease Options – Good & Bad

16 May

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It doesn’t matter if you’re a buyer or a seller.  Lease options are both good & bad.

The Good As A Lease Option Buyer – 

  • You can earn your down payment and closing costs by giving the seller/landlord a larger deposit
  • You can get credit each month from the rent you pay that you can also use towards your down or closing costs
  • You can try out the house before you buy it
  • If you decide you don’t like the house or the neighborhood, you don’t have to buy the house
  • The landlord/seller can’t sell to anyone else until you decide you don’t want to buy the house

The Bad As a Lease Option Buyer –

  • You don’t get your deposit back if you don’t buy the house
  • You don’t get your monthly rent credits back either
  • You don’t get the tax write-offs like you do when you buy
  • You can be evicted if you don’t pay because you are still a tenant

The Good As A Landlord/Seller –

  • You get a larger deposit from your tenant buyer
  • You may get a little more rent each month that you only have to credit the the tenant buyer for if they complete the sale
  • You get a tenant who will take much better care of the property because they hope to own it
  • It’s easier to get rid of a bad tenant that it is an owner financed buyer because you can evict them instead of foreclose on them
  • You can sell the house at a retail price instead of competing with the bank owned or short sale properties in the neighborhood

The Bad As A Lease Option Landlord/Seller –

  • The buyer is still just a tenant and you are still a landlord
  • Depending on your arrangement with the tenant, you may still be responsible for the maintenance and upkeep of the house
  • You don’t get all your money at once

Lease optioning a house can be very beneficial for both sides of the deal.  Make sure to do your homework, get it in writing about who takes care of what (utilities, upkeep, repairs, etc.).  Know the risks on both sides.  

Now go lease option a house.

What’s Up for 2012?

2 Jan

Las Vegas is an interesting market.  We are still facing challenges from the housing bubble and probably will for another 3-5 years.     

Out of the 23,918 properties on the market as of today (per our MLS and including single family homes, condos, townhouses and manufactured homes), 360 are open to selling with terms.  That is less than 2% of the sellers out there that will consider selling with owner financing or as a lease option.  The  remaining 98% percent are made up of bank owned and short sales, and private sellers who either don’t understand owner financing, aren’t open to it, or their agents don’t understand how to present it as a viable option for their sellers.

Currently 7% of the houses on the market here are not being sold as a distress sale.  That means they are not a short sale or foreclosure property, but a seller with actual equity either because they didn’t over finance their house or they are an investor trying to make money flipping a house they bought after rehabbing it.  And out of this 7%, only 7% will consider creative financing terms.

As investors who bought houses in the last year or two, who were trying to flip them for a quick profit discover that this is still not a great market in which to flip a house, we hope will become open to seller financing in order to sell their investment property.  The reason they may consider it is because they get someone to live there who will take care of the property because they want to make it their own, give them a good return on their money, and turn all of the maintenance and repairs over to the new occupant who wants to be a homeowner.

What that does mean to you is the pool of these types of properties is very small and if you see something that will work for you, you need to act on it quickly.  You may not get everything you want like a brand new kitchen, or a pool, or you may have to drive a bit further than you hoped.  But if homeownership is your goal, and traditional means aren’t available to you because of credit or being self employed, this is a great way to purchase a home.

As licensed agents here in Las Vegas, we strive to make this deal as painless as possible.  So do your homework, be prepared to show proof you have a deposit, be able to explain why you can’t get traditional financing, and don’t be afraid to work towards fixing the issues so you’ll be able to refinance in 2-5 years.  Expect to see new properties added to our blog several times a week.  And if you don’t see what you’re looking for, don’t hesitate to ask.  Properties get added regularly.

Our goal in 2012 is to help as many of you become homeowners as possible.

Happy New Years from us at Owner Carry Only.  702-531-4798  info@ownercarryonly.com

Lease Option vs. Owner Carry

19 Dec

There is a big difference between Lease Option and Owner Carry or Owner Financing.  

When you lease option a property, you are still a tenant but have the right to buy the property at a future date.  You give the landlord/seller a deposit that they agree to credit you for, in addition to a portion or your rent each month, that will be used towards your down payment and/or closing costs when you exercise your option to purchase.  Depending on how the agreement is written, you may also be responsible for any maintenance, upkeep and repairs on the property while you live there (remember, you do plan on owning it one day).  

For example, you and the seller agree that you will buy his house for $100,000.  But since you can’t get a loan right now, you will give him $5,000 as an option deposit, and out of the $1000 a month rent you pay, he will credit you $250 each month your rent is on time.  So at the end of one year or 12 months, you’ll have $5000 + (12 X $250 or $3000), which totals $8,000 towards purchasing the house. If you’re able to purchase the house in 12 months with an FHA loan, 3 1/2% or $3,500 would be counted as your down payment and the rest of your credit of $4,500 would be used towards your closing costs.  

The good news is you now have enough money to be used to purchase, had 12 months to fix whatever your credit problem may have been so you can qualify for a mortgage, and you probably won’t have any additional money to come up with in order to get a loan.  You didn’t have to come up with 10-20% as a down payment.  Also, you don’t have to buy the house if you don’t want to but the seller can not sell to anyone else until you decide whether or not to exercise your option. Of course, you have to pay your rent on time or you can void the contract.

The bad news is you are still a tenant and don’t get any tax benefits from paying for the house.  Also, depending on how your agreement is written, you may also be responsible for doing all the repairs on a house you don’t own. And most important, your deposit and any rent credit you may be earning is not refundable to you if you choose not to exercise your option to buy the house.

Owner financing is completely different.  When you purchase a property where the seller/owner agrees to act as the bank, you will actually go through escrow. Your deposit is now a down payment, and your payments will be treated the same way as if the bank was financing with you.  However, several things are important to know:

1. You will have escrow fees and inspection, and closing costs.  Here in Las Vegas that is anywhere from 1-4% depending on the price of the house (the cheaper the house, the higher the percentage because some costs are fixed no matter what the price of the house is).

2. Your down payment will usually be as little as 10% to as much as 50% of  the price of the house, depending on what you and the seller agree to.

3. You will usually pay retail or slightly above retail price for the house.  Seller’s offer financing because they don’t want to sell for the same price the bank owned or short saled house down the street is going for.

4. Sellers offer financing because they can get better interest from you than they can from the bank, so expect to pay 1-5% more for your mortgage.  Right now banks are financing loans for under 4%.  Most sellers are offering to finance you for 5-10%.  Its their house and they can ask whatever they want in interest.

5. The seller usually only agrees to act as the bank for 3-5 years, sometimes 10 years, but seldom longer.  They don’t want to be the bank forever.  So whatever is preventing you from getting a loan now, you have to use this time to fix your credit, stabilize your income, and possibly work with a loan officer so you’ll be able to get a mortgage in a few years.

6. You now become the owner of record and you get the tax write off for the property.  

Owning is always better than dealing with a landlord, but either one of these paths will help you become a homeowner.