Home Partners of America

The problem the business is here to solve:  Fannie Mae requires a 4 year seasoning period since last bankruptcy;  FHA requires a 3 year seasoning period since Short Sale; and Freddie Mac doesn’t even tell you how long you need to wait (guidelines state “Determined by [automated underwriting system]”…which basically means, wait a while, then maybe you’ll get approved.  The problem isn’t necessarily that there are seasoning requirements between buying a home and major credit hits, the problem is that by the time these seasoning requirements are met, home prices are drastically different in some metropolitan areas to the point where those homebuyers now can’t afford to buy anything, and become stuck in rental purgatory.   For example, in the last two years alone, home prices in Seattle have risen 42.5% (from July 2014 to July 2016).  A would-be homebuyer is drastically behind the curve if they are forced to wait on the sidelines to meet mortgage seasoning requirements while the housing market passes them by.    

The solution:  Home Partners of America.  What HPA does is essentially buy the house upfront, then lease it back to the clients for up to 5 years.  They guarantee rent won’t rise more than 3.75% annually, and over the course of those five years, the tenant can buy the house for a pre-set price which slightly increases annually – in Seattle it’s 5% per year.  That 5% appreciation rate is a FAR cry from what housing is actually appreciating at here in Seattle, but yet it’s also a high enough return given the risk that it makes a business like this viable, and attractive to investors. 

Home Partners has grown incredibly fast over the last few years mainly due to its ethics.  It’s a straight forward lease to own business that doesn’t take advantage of clients like some other companies in this industry have done in the past.  The company now operates in 38 markets across the nation, and owns around 5,000 houses (about 250 in Seattle).  It might be the best option for someone waiting to meet their seasoning requirement before they can be approved for a mortgage, but it’s definitely one worth knowing about.  Read more about HPA here:  http://www.bizjournals.com/seattle/news/2016/08/23/ex-goldman-sachs-execs-new-company-helps-kent.html

Happy Investing!

Today's blog courtesy of Kyle Bergquist, Guild Mortgage

No Money Down

No savings to buy a house, despite a good job and a two-year history of employment?

 Do you have a credit score of 620 or better? (not sure, you can check for free on creditkarma.com)

If you do, why rent when you can own your own home today? Are you tired of wasting money on rent while they continue to increase the amounts all the time? If so, contact me to today to find out about some great programs designed to get you into homeownership!

You may qualify to buy with little to ZERO out of pocket expenses! These are great little or no-money down, homebuyer programs at low interest rates available, so contact me today to get started!

This Lake Walker home is just a sample of what is available on the market today that you may qualify to buy. A qualifying owner-occupant could have bought this lakefront property for no-money down. Find out more.

Send me a private message at HomeLandInvestment@gmail.com or call my recorded hotline at 888-621-4999 any time.

Happy Investing 

Rent to Own

From Craigslist:

Hi, I am seeking seller financing for a home in West Seattle. Currently rent, tired of renting, newly divorced, so I won't have the 3.5% down saved for a long time! Desperately want to own a home again. Looking for someone who can offer me rent to buy option. Looking for payments no more than $1200.00 a month. My lease is due in Spring, I can put some funds down, but probably about $2000 if that works. Willing to sign a recorded contract and forfeit any deposit and all paid rent towards purchase in event of default (won't happen). Rent is very expensive so that is also why I want to buy. I'll even pay (finance $5,000) above your homes asking price in order to obtain financing, then can use down payment of rent in order to refinance home in my name (purchase is done as a refi if recorded and owned for a few years and contract needs to be added to title). I'm a mortgage professional, so that's why I know how to do this and am asking. Maybe you are a landlord and want to sell one of your properties, or just need to rent out your home and can sell it later. Anyways, serious offers only, I'll provide my personal info for credit check through an attorney of your choosing, or other professional who can write contract (real estate agent). Not a joke-just a desperate buyer who can't afford damn down payment banks want, tired of flushing my money in toilet with rent. Hope to hear from someone soon. Thank you.

Seller financing used to be more common than it is today, and it was a way to help buyers like this one prepare to buy a home and for sellers to sell quickly and easily for more money.

Rents are going up in Seattle, and tenant/buyers like this one are tired of wasting their precious resources on renting. Seattle is a great appreciation market, and housing prices have appreciated rapidly in this city since 2008. Now prices to purchase even modest homes outstrip most people's ability to purchase a home, even a small one.

I have no idea whether this particular buyer was successful in his efforts to secure seller financing. I am always on the search for seller financing, both for myself and for my investor clients. Seller financing gives buyers the opportunity to get into a property at a reasonable fair market price with affordable monthly payments. 

For the seller, it means they can often negotiate a higher price, avoid many of the costs and hassles of listing with an agent on the NWMLS, have a larger pool of potential buyers, and ultimately make more money.

Seller financing, rent to own, lease to own and other options are examples of owner financing, without going through an institutional lender.

If you are interested in learning more about seller financing, please message me privately at HomeLandInvestment@gmail.com or leave a message on this blog post.

Happy Investing!

 

Rent to Own?

So your house did not sell?

I notice your property has not sold and is listed for rent. I am curious if you just want to rent ONLY?

Or would you be interested in some of my qualified tenant buyers who are looking to rent now but want to purchase the home in 1 to 3 years?

We also have buyers with a lot more cash looking to get owner financing based on your terms.

We have a lot of people like married couples, single moms and dads who have nice chunks of cash and have good paying jobs that will pay you full price for your house. However dings on their credit in the past has put them
in the situation where they are not the banks " perfect customer."
 
We are working with them to get their credit cleared up and to get them into homes they can realistically afford, so that they can rent now and then purchase them in 1 to 3 years.

No cost to you the homeowner, our fees are paid by the tenant/buyer.

Are you interested or would you consider it?

If you are, send your contact info and I will give you a call so we can move forward.

I am always open to "rent to own" options.

Happy Investing!

Foreclosure Pain

"What about lease option or rent-to-own?" my state auditor asked me. "Are they for real?"

"of course they are!" I answered. "It all depends on the terms you can negotiate, and your ability to meet those terms....Why do you ask?"

Because, it turns out, my state auditor recently lost his Magnolia home of over ten years to foreclosure. His story is tragic and reflects the pain that foreclosure costs many homeowners in today's economy.

He and his wife were hardworking Philippine emigrants, she from Canada and he now a US citizen, believing strongly that ours is indeed the land of opportunity. Then his wife got breast cancer about five years ago. The chemotherapy and radiation therapy destroyed her heart. She almost died. She was fortunate to receive a heart transplant.

In the mean time, their medical bills mounted. She had made more money than he as a medical technician; he had a good state job. But now without her income, they could not pay her medical bills and make ends meet.

He applied for and received a loan modification on the house. He made the first two months payments, but was short on the third. He asked the bank if they could wait a week for the balance of the funds. The bank said no.

She lived. But they lost their house. In the process, he lost his faith in the United States (as did LuAnn Lavine in our previous post). They now plan to move to Canada when he retires in three years - but he was still wondering if maybe, maybe they could own a home again. Maybe, with rent-to-own?

Creative acquisition techniques may be the only option for future homeowners, given that so many people have been challenged in this economy. Lease purchase, rent-to-own, options and seller financing are some of the techniques that deserving buyers may use to purchase a home in a tight lending environment, where the banks are faceless, heartless corporate entities, and where 50% of all deserving buyers cannot get loans.

So yes, there are good deals out there on foreclosures. And while each foreclosure represents someone's heartache and pain, savvy buyers are jumping into the housing market where others can no longer go and providing new opportunities for someone else to have a home they can afford. Where one door closes, another opens....

And so yes, Mr. Auditor, rent-to-own is certainly an option for you and your wife. Just make sure that you are doing business with someone you trust, and that you are represented by someone who cares about giving you another opportunity to believe in the goodness of our country....

Equity Partner on Lease Option Deal

So how would I approach an investor to partner on the lease-option deal described in the previous blog?

In my previous blog, I talked about how I would structure a lease-option purchase for a waterfront property listed for $325,000. In this blog, we will look at how this agreement would appeal to an investor and equity partner.

A conventional mortgage of $250,000 would be needed to replace a hard money loan currently in place on the property. So an investor/equity partner would be someone who was able to qualify for a $250,000 mortgage. As owner of the property, I would be listed on the loan with my equity partner.

The loan would be a conventional, non-owner occupied, interest-only loan, as we expect our lease-option buyer to be able to purchase the property from us in 2-3 years. We could also take out a fully amortized 30-year loan, if we had doubts about the ability of our buyer to exercise their option to purchase, or if we wanted to build in flexibility for future exit strategies. A fully amortized loan would cost us more, but interest only, with taxes of $308 and insurance of $50, would cost us $1800 per month.

If our buyer is paying us $2500 per month (see previous blog), then my investor and I are splitting $700 per month for three years ($25,200 total over three years).
I will cover all the costs of the loan out of the down payment provided by the buyer, so there is no cost to the investor to take out the mortgage—and they are making $8400 per year. In addition, as my equity partner, they get to deduct mortgage interest from their taxes and depreciation on our investment property. Since we are paying interest only, approximately $1440 per month of interest is tax deductible. In addition, they get to depreciate the value of the house (but not the land) over 27.5 years, further reducing taxable income.

As added incentive, I agree to split the net profit on the house over and above my basis of $325,000. So if the house sells for $337,000 ($357,500 less $12,500 as option fee and $18,000 in rent credits), we split another $8000.

So my investor/partner earns a total of around $29,000 over three years for their ability to take out a mortgage, an infinite return on their initial investment of $0. Not bad, eh?

Lease Option on Rocky Point Waterfront Home

Here is a case study of how I might work with a lease-option buyer on the purchase of the property highlighted in the last few blogs. In my next blog, I will discuss how an investor would profit by underwriting the mortgage for the lease-option buyer.

On a lease option, I typically pay the selling agent 1% of their commission up front, and the remainder when the option is exercised. So the down payment has to cover commission costs, option fee, and other related costs. I typically like to see 3 1/2 - 5% down as a non-refundable option fee. I used to bump up the purchase price by about 10% per year for seller financing and future value on an option, but in this market I'd be okay with $357,500 as a purchase price in three years for the house parcel.

Monthly payments should be equivalent to what monthly payments would be on the take-out loan, including taxes and insurance. Lenders like to see this too, as it demonstrates ability to repay.

If the buyer went FHA with a loan amount of $345,000, the FHA funding fee would be $6,000 so the loan would be for $351,000 then the payment with a 5.50% rate would be $1993 plus $161 for Mortgage Insurance (MI), and $308 for taxes and $50 for a total of $2512 a month.

Assuming the buyer put $12,500 down as an option fee (applied toward the purchase price), then monthly payments on the loan amount above would be roughly $2500 with taxes and insurance. I would be willing to apply $500 of the monthly rent as rent credit towards the purchase price, assuming payments were made on time.

At the end of the three year term, the house would be purchased for $357,500 less the option fee of $12,500 and rent credits of $18,000. The loan amount would actually be for $337,000--and payments would be even less per month. This is a good option for a buyer who cannot qualify for a loan today, but may in 2-3 years.