My wife never ceases to amaze me. I've often heard that women have a right to change their minds, and my wife fits that statement to a tee. Last night, while talking more about the property, she exclaims why I didn't decide to lease it out. Huh?!?! I explain to her that she has not only wanted me to sell this property retail as soon as I can, but to not lease/rent it out. She claims we discussed this already and she was fine with leasing it out. I swear I don't ever remember that conversation, because her agreeing to lease it out would definately be a shock that I wouldn't forget. :-)
So now I'm at another crossroads. My RE agent is supposed to go out to the property on Thursday to take a picture for the retial listing. My wife wants to list it as both a retail sale and a lease. If it is going to be a lease, though, I would rather make it a lease/option, and not just a rental. So now what can I do? Any suggestions from the people who read my blog?
My RE agent said she would need my list price by the end of the day on Thursday, so that she can put it in the monthly circular (it has a cutoff on Friday). I won't actually meet with her until Saturday morning to sign the paperwork, though.
Subscribe to:
Post Comments (Atom)
9 comments:
Well, I've seen lots of listings where they've said, "owner financing available". But, I wonder, if you were to list the property as retail, what would happen if you got a tenant-buyer before the contract was up with the agent? Would you be in violation of the contract?
I think in this case, I may just lease it (without an option to by). I may be treading into some legal issues, and with the L/O bill going through the Texas legislature now, I'm not sure what effects it will have on standing contracts. IF I list it as both for sale and lease, and end up getting a tenant, I may only make the term a year and decide next year what to do.
One thing to consider is: What is your objective? Is it to learn how to flip a property? Is it to learn how to manage a property? Is it both? Other objectives? What was your objective when you purchased the property?
If you are deciding to use it as a rental there are many aspects to consider: Gross rent, vacancy rate reserves, adequate financing, repair reserves, routine maintenance reserves. After all these things are calculated do you have + or - cashflow.
If deciding to use it as L/O property some of the concerns listed for rental property go away depending on how the contract is drafted (i.e. maintenance and repairs)
I've got to run now, but I'll let this simmer in my mind some more and come back with more things to think about. I'm not suggesting you take path A or B here. I'm trying to help bring about the context in which you made the purchase: What was your objective? And has it changed?
anibal - My motive all along was to buy-and-hold. Flipping generates immediate cash, but the property is no longer yours to build for long term growth. My ultimate strategy would be to do a lease/option - period. Since my wife has objected to "rentals", though, I decided to face reality and sell retail. However, with her change of heart recently, I am back at a crossroads. she still doesn't sound 100% convinced, so that is why I left the retail sale open (there's a lot of trade-offs).
Early on, I received a powerful spreadsheet tool from my RE agent called APOD (Annual Property Operating Data). You plug some figures into it, including maintenance, property management, tax rate, etc., and it figures cashflow, depreciation, sales, IRR, and other stuff for you. I'll send you and other frequent readers here a copy of it. Since I got it with no strings attached from my RE agent, I don't see any issues with giving it out.
Of course, you could always sell this one and use the money from it to buy one you will rent...
But it's just so perfect for a rental, Shaun! (Okay, now I see why they say never to get emotionally attached to a property.) :-P
The area isn't what I'd call a booming rental haven, however, there are a few properties for rent in the area. One in particular is a L/O about 10 houses down. The investor is asking for $1,300/mo., which is really high for the area. I would have to refinance and then charge about $1150/mo just to keep positive (after all expenses were accounted for, of course).
If I get a retail buyer in the next couple of weeks @ $135,000 and they close by the end of June, I will net $15k (before taxes). Each month I hold drops the profits down roughly $1,000, so I could still manage for a year, hypothetically speaking.
Property values are still a little stagnant in central Texas, but this area seems to be going up slightly (~2.5%). I'm not too worried about cash reserves as I can pull equity out of this property by refinancing, if it comes to that (which it shouldn't).
I think I'll put it on the market for both and see what happens. If it sells to a retail buyer, I can rejoice with the profits and find another property or two. If I get a tenant, I'll structure it for a year lease only and decide what to do with it in a year. I guess having both options available may prove to expand the pool a little more, anyway (I hope).
Of course, the downside is I don't get either and have to dig deeper just to unload the thing (I guess this is every newbie's fear).
Thanks a ton for the comments and suggestions, guys and gals. I've learned a lot these last 2.5 months from not only OJT, but from the suggestions/comments you people give.
I forgot to add that another reason I would like to opt for holding properties over flipping is the fact that I know a lot of the proceeds will go towards what Kiyosaki terms 'doodads'. Not a lot, I'm sure, but training myself and my wife what the money is intended for can be hard, especially when we have outstanding personal debt. With a buy-n-hold, the money is tied up in the equity of the property, and is less liquid.
I also forgot to add that if this does in fact turn out to be a rental, I need to do one more "repair" ... the place has no blinds/drapes!
Steve, I've been reading your REI blog for a little while now, as well as many others. I'm considering getting into REI myself, so am reading as much as I can. I saw you mention that you would be willing to send a copy of the APOD spreadsheet to your faithful readers... any chance you could send me a copy? :) If so, please send it to this address, with the obvious corrections, conradf at techie dot com.
Thank you for your time, and good luck with your investments!
Post a Comment