How To Lease Purchase Real Estate

lease purchase real estate

A lease purchase real estate agreement, sometimes also called a rent-to-own, is basically an option to buy real estate at a certain time and at a certain price.

One of the most important terms to have in a lease purchase agreement to buy real estate is that an escrow or servicing company collects the monthly payment.

After collecting the payment the escrow company accrues the portion of the payment that goes toward the purchase price into an escrow account.

Lastly, they remit the balance to the seller.

Basics of a Lease Purchase Real Estate Agreement

The seller and tenant/buyer should:

1) Agree to a future purchase price at a certain date.

2) Agree to the lease amount of the monthly payment.

3) Agree to the total monthly payment which includes the rent and the extra amount that goes toward the purchase price.

This lease purchase real estate agreement should be written and treated like any other purchase contract.

The seller and tenant/buyer should have a third-party such as an escrow company or attorney collect the total monthly payment from the tenant/buyer to the seller, accrue the funds that go toward the purchase price, and remit the balance to the seller.

Issues With A Lease Purchase Agreement

Many times people enter into a verbal lease purchase real estate agreement.  They don’t use an escrow company or third party to receive, account for, and disburse the monthly payment.  Instead, they do everything themselves.

Doing this puts both the seller and buyer/tenant at risk.  Normally people do this to try and save a little bit of money.

The two common issues that arise with a lease purchase agreement for real estate are:

1) Who pays the monthly servicing fee.

2) Determining the future price of the property.

In most cases, splitting the escrow fee between seller and tenant/buyer is the accepted course of action.

The agreed-to sales price of the property can be confirmed with an appraisal when the lease purchase real estate agreement is exercised.

Is Allowing Real Estate Pre-Possession A Smart Move?

real estate pre-possession

Real estate pre-possession means that the buyer or tenant are allowed access to the real property before the sale is closed or the lease begins.

There are pros and cons to a seller or landlord allowing real estate pre-possession.

Pros of Real Estate Pre-Possession

Probably the biggest pro of allowing a real estate pre-possession is that it creates a good working relationship between the two parties.

If you’re selling a property, allowing pre-possession can help keep the deal on track.

If you’re a leasing property manager or owner, allowing the tenant early access to take measurements and get bids from contractors can establish a good landlord-tenant relationship right from the start.

Cons of Allowing Pre-Possession of Real Estate

There are also some drawbacks to allowing a buyer or tenant early access to the property.

In the case of a real estate buyer, they may be secretly looking for a reason to cancel the purchase agreement.

Maybe they’re having second thoughts about buying your property.  Or maybe they found a better deal somewhere else.

If that’s the case a buyer will try to come up with an issue they claim was never disclosed to them.

Sometimes they will try this move even if all of the contract contingencies have been removed.  The threat of non-disclosure can create big problems for the seller both before and after close of escrow.

Allowing tenants pre-possession can also create potential problems for the property manager or landlord.

One of the biggest risks is that the tenant underestimates the cost of its tenant improvement.  Or they realize the cost of making their space move-in ready is more than they anticipated.

A tenant who has second thoughts will then try to raise all sorts of issues with the landlord.

They will try to turn minor issues into big ones.  This virtually guaranties the tenant will be a problem to deal with.

Often times over the entire term of the lease!

Five Steps To Forming A REIT

forming a reit

Many active real estate investors reach the point where they consider forming a REIT.

Forming a REIT – also known as a ‘real estate investment trust’ or a group investment – can be simple and straightforward.

Here are the five key steps to follow when forming a REIT.

#1 Create an LLC when forming a REIT

An LLC – or limited liability company – is the most common legal and tax entity for holding investment real estate.  The Internal Revenue Services recognizes this structure, as do the laws of each State.

#2 Seek investors

Investors in the LLC are buying shares of the company, not the real estate itself.  Usually – but not always – the percentage of ownership equates to the amount of capital an investor contributes.

Unless you have a strong past working relationship with the investor, you will need to have an idea of what type of property is going to be acquired, and have a P&L and cash flow analysis put together.

#3 Passive vs. active investors

Like the name suggests, a passive investor is one who puts money into the LLC and does nothing else.

In addition to putting money into the LLC, active investors also contribute their skills, time or knowledge.  Sometimes this is in exchange for a greater share of the profits or cash flow, or for an increased number of shares in the LLC.

Examples of an active investor activity in a REIT include putting the mortgage into one’s name, acting as a general contractor, or managing the property.

#4 Written document

While forming an LLC is consistent from state to state, it’s best to have an attorney draw up the LLC operating agreement.  An experienced real estate attorney will help you to address any unforeseen issues that may arise down the road.

#5 Distribute profits

This is the fun part.  There’s profit made on the property appreciation when it is sold, and there’s the profit from the net monthly cash flow.

Remember, depending on what the LLC’s operating agreement says, these two income streams may or may not be distributed based on the percentage of stock held in the LLC.

 

How To Make Money With Vacation Rental Property

make money with vacation rental property

There are a lot of ways to make money with vacation rental property.

Some people rent out a spare bedroom while others rent out their entire house.  Some hosts even rent the place that they’re renting out on sites such as Airbnb.

Make Money With Vacation Rental Property

Here’s the #1 tip to make money with vacation rental property:

Greet Your Guests In Person

This is absolutely contrary to the smart lock trend.

The rationale for using a smart lock is that it allows guests the opportunity for late arrivals and early departures.  And that’s a good thing.

But sometimes vacation rental hosts get lazy, or they’re too busy property managing other vacation rentals.  So they use the smart lock as a crutch and don’t meet their guests in person.

Guests really appreciate a quick tour of the place and being able to put a face to the name of the host.  After that a phone call or quick text message is all that’s needed.

Top Notch Internet Service

The #2 tip to make money with vacation rental property is to offer top notch internet service.  That’s because virtually everything we do now days is on the internet.

People Skype and use Netflix all the time.  Business travelers using vacation rental property as a home base often times need a speedy connection to hook up with the server at their main office.

Smart hosts will make sure the internet in their vacation rental is superior, and then tout that fact on their listing.

Including a screen shot of a Speedtest report is also a great sales tool.

Each vacation rental property market is different.  But using these two examples of how to make money with vacation rental property will help you do just that, no matter where your vacation rental is located.

(If you’re not familiar with Airbnb, using this link will get you a $25 credit on your first visit anywhere in the world!)

 

Three Ways Neighbors Can Undermine Your Open House

neighbors can undermine your open house

At first glance it might seem strange that there are ways neighbors can undermine your open house.

Anybody who has been in the residential real estate business for a while knows that this is absolutely true.

Why Would Neighbors Want To Undermine A Open House?

Most people get along with their neighbors just fine.  But once you decide to sell your house and a ‘For Sale’ sign pops up, your best next door neighbor can become your worst nightmare.

Neighbors believe that when the house next to theirs is for sale, cars will be blocking the street, criminals will come to the house disguised as interested buyers, and real estate agents will be knocking in their door seeing if they’re interested in listing their house for sale.

So, as odd as it might sound, neighbors will try to make it difficult to sell your house.

Here are three ways neighbors can undermine your open house!

Ways Neighbors Can Undermine Your Open House

#1  Stealing the ‘open house’ signs – This is probably the most common way that neighbors try to sabotage an open house.

Right after the open house begins the neighbor will back-track through the neighborhood and remove all of the open house signs.  Often times they will try to sell them on the internet to make a little extra money!

#2  Spreading lies about your house – Neighbors have been known to lie in wait for people leaving an open house.

Then they will casually approach the prospective buyer.  Striking up a conversation, the neighbor will then talk about a fictitious murder in the house.  Or they will mention seeing the termite pest control truck in front of the house yesterday.

#3  Loud parties & music – Open houses are usually held on the weekends, to attract the highest number of potential buyers that are shopping around.

Unfortunately the weekends are also when your neighbor is probably home.  You’ve never heard a noise from the neighbor for as long as you’ve lived in the house.

But, oddly enough, your neighbor will pick the day of your open house to have a loud, drunken pool party with heavy metal music.

Vacation Rental Property Management Trends

vacation rental property management trends

Vacation rental property management trends are a hot topic lately.

That’s because more people are renting out their home part of the time, or sometimes most of the time.

Here are some of the latest tips and trends in vacation rental property management.

Personal Touch – The #1 in vacation rental property management trends

Many owners of vacation rental property are going the way of smart, electronic lock boxes.  The reason for this is that it makes it easier for the guest to arrive early or late, and to come and go as they please.

While that may be true, guests also appreciate the personal touch of being met in person, getting a quick walk through of the place they’re renting, and having any questions answered.

Speaking of the personal touch, guests absolutely love the offer of tours or events put together based on their interests – golf, wine shops & tastings, best foodie locations.

Doing this shows the guest that you want them to have a great time during their stay and are willing to go the extra mile.

Richer Experience – Why people choose vacation homes to rent

Sites such as Airbnb are becoming increasingly popular almost everywhere around the world.

(If you’re not familiar with Airbnb, be sure to check it out.  you can get an Airbnb travel credit just for clicking and signing up.)

People who travel for pleasure or business are tired of the traditional hotel experience.  Vacation homes offer a much richer experience.

They are located in local neighborhoods vs. business or tourist districts.  Guests get a better idea of what the area is like.  They can shop at the local stores and eat at the local restaurants.  Plus they get to meet ‘real’ people rather than other tourists.

Easy To Use

Millennials make up the largest segment of vacation renters.

These are people who are used to using the internet and cell phones for almost everything.  Online booking and payment makes managing a vacation property much more efficient, as does text messaging.

Sending a guest a quick text to make sure everything is going well is very much preferred over a phone call that could interrupt whatever they are doing.

Remember that the personal touch is one of the most important vacation rental property management trends.

How To Sell A Rental House

sell a rental house

When the time comes to sell a rental house there are three important factors to keep in mind.

That’s because selling a rental house – or any other residential rental property – is quite a bit different from selling one that the owner used to live in.

Tips To Sell A Rental House

Here are a few things to keep in mind if you want to sell a rental house.

#1  The rental house shouldn’t look like a rental

Most houses for rent look pretty basic.  They have all white paint, basic window coverings and appliances, and very little landscaping.

All of those things are great if you own a rental house or property manage real estate.   They help to keep the routine maintenance costs down and minimize the things that can go wrong with the rental house.

Updating the paint colors, fixtures and appliances can help make the house you’re selling not look like the rental property that it once was.

#2  Consider staging the rental house

If you’re trying to sell a rental house it should be vacant and without tenants in it.  It’s always easier to sell a house that used to be a rental when there is nobody in it.

Once the paint colors and fixtures have been updated, consider staging the rental house for sale.  Proper home staging can highlight the best features of the house.

Staging a home will also make it easier for a buyer to picture your house becoming their home.

#3 Remember the HOA rules & regulations

Good landlords and property managers know that finding and keeping great tenants means there are no surprises.  The tenants know up front what the rules and regulations of the home owners’ association are.

When you’re selling a house that was a rental, always be sure to let the potential buyers know about the HOA rules & regulations.

Doing so will avoid any unpleasant surprises during the escrow, and will make it that much easier to sell a rental house.

How To Break A Lease

how to break a lease

There are times when either a tenant or a landlord will want to break a lease.

Why A Tenant Would Break A Lease

A tenant may want to break a lease for a variety of reasons, some legitimate and some not . . . at least in the eyes of the landlord.

Maybe a group of roommates rented the house and now one has left.  Or the tenant may have lost a job.  Or there’s a personal situation such as a divorce or major illness.

Why A Landlord Would Break A Lease

There are also times when a landlord wants to break a lease.

One example is if the landlord owns a single-family house that is a rental and decides to sell.

It’s almost always easier to sell a vacant house rather than one that is occupied.  Buyers – especially those looking for a home of their own to live in – don’t want to have to deal with a tenant.

Or sometimes the tenant doesn’t cooperate with showings or keeping the house in good condition.  Even if they say they will.  This is a stealth way of a tenant sabotaging the potential sale of the house they’re living in so that they can continue to rent.

A landlord might also want to consider breaking a lease if the tenant is simply too much trouble.  Even if a landlord knows how to find and keep great tenants, it’s always possible to end up with a bad tenant.

Some tenants need to be constantly reminded to pay their rent on time.  Others constantly need something fixed or are disruptive to the next door neighbors.

Tips To Breaking A Lease

To avoid time, trouble, and possible property damage, smart landlords try to make breaking a lease a win-win situation.

First, find another tenant.  Be especially sure to check their references and verify the tenant’s income.

Next, make the first tenant responsible for making sure everything is clean and in good working order, and the the house is move-in ready.

Lastly, have the new tenant take over the remaining term of the existing lease, and sign a new lease as well.

Doing this will minimize any loss of rental income or unnecessary repair expenses, and create a win-win situation for both the landlord and the tenant who wants to break a lease.

American Freelance Copywriters Are In Demand

american freelance copywriters

American freelance copywriters are in demand as never before.  This is according to the most recent Freelancing in America: 2017 survey.

As a top-rated and top-earning real estate freelance copywriter on Upwork I was fortunate enough to receive a copy of this report.  Here are some of the most interesting findings.

Why American Freelance Copywriters Are In Demand

The most recent survey identified a number of reasons why freelance American copywriters are in demand from clients around the world.

The top three factors for choosing a copywriter based in the U.S. include:

  • Freelancers in America are better prepared for the future – They take what they do seriously, and invest in themselves by taking skills-related education almost twice as much as their non-freelancing peers do.
  • American copywriters freelance by choice, not because they have to – Implicit in this decision is the determination to excel at what they do.  This means that clients of freelance copywriters can expect to receive the highest quality product.
  • Technology is enabling American freelance copywriters to do more for clients around the globe – Thanks in large part to the pervasiveness of the internet and the ability to work online from anywhere in the world.  American freelance copywriters are able to work with clients anywhere and anytime, no matter where the client is located.

American Freelance Copywriters Contribute To The Economy

The Freelancing in America: 2017 report notes that over the past year American freelance copywriters  – and freelancers overall – contributed about $1.4 trillion to the economy.

That’s more than the GDP of Panama and Costa Rica combined, according to the latest global GDP report from Statistics Times.

What Motives American Freelancers?

There are four motivating factors the American freelance copywriters have in common:

  1. Be their own boss
  2. Choose when they work
  3. Choose their own projects
  4. Choose where they work

While these four items relate to the freelancer, they also benefit the clients whose projects they take on.

That’s because a successful, full-time American freelance copywriter can be selective, which means that when a client’s project is accepted the work produced will be second to none.

 

How To Tell If A Real Estate Copywriting Client Is Legit

real estate copywriting client

As someone who makes their living as a freelance real estate copywriter, it’s important to be able to tell whether or not a real estate copywriting client is legitimate.

That’s because, as the old saying from Ben Franklin goes, time is money.  The more time a freelancer spends on a prospect who isn’t going to turn into an actual client, the less time there is for a legit client.

Real Estate Copywriting Client Litmus Test

In chemistry a litmus test is used to tell whether a solution is acidic or basic.  Freelance writers look for real estate copywriting clients who are acidic.  We want clients who actually do something – who react.

Basic clients, on the other hand, are those who do nothing.  In other words, they don’t react.

Ways To Make Sure A Copywriting Client Is Legit

First, look at how quickly a prospect responds to a project inquiry they’ve made.  Usually prospects are anxious to get their project completed.  That’s because, just as with real estate freelance copywriting, time is money in the real estate business as well.

Clients who take more than two or three days to reply to an inquiry they’ve made aren’t going to be that serious.  Or, they are actually a middleman in disguise, and they’re waiting for a response from their client.

Next, if the client won’t sign a contract for services, they’re not serious about their project.  Plain and simple.

Talking is one thing, but signing on the dotted line and submitting a deposit is something completely different.

Qualifying A Real Estate Copywriting Client

After we know a real estate copywriting client is legit, it’s important to know if their project is as well.  Not legitimate in the sense of an actual project existing, but in the sense of whether or not that project can be done well.

Is the project defined?  Are the characteristics of the target audience known?  Or is the real estate copywriting project vague, with the target market being everyone who is buying and selling real estate?

Some clients already know how to get the most from their freelance real estate copywriter, while others will need to be guided through the writing process.

The end goal is to make the real estate copywriting project a win-win for everyone involved.