Who said being a landlord doesn’t pay! All you gurus and students out there who only concentrate on just the blow and go flips are missing out on MANY other kinds of income streams. Let me tell you a short story…
So I get a renter about two weeks ago for a little 1300 Square foot Ranch Style that I have in central Little Rock. They look great on paper. They look great in person. They get the house. But something doesn’t feel right. After all the years in this business I can just smell it, know what I mean? (If you don’t know what I mean, then you need to be in one of my coaching sessions.) So I do a little checking at the county database. Just as I suspected; there’s a problem. It seems that my new tenant is on the run….sort of. He is on the run from his mortgage company. It appears that he is behind in his payments and just decided to bolt and abandon the property rather than work it out with Chase Mortgage. It’s a sad state of our present economy, one more poor schmuck who got it in the derrière with a 5-1 ARM. Well, I confront him with it and he admits that yes, he is three or four months behind, but not because he can’t pay mostly because he is pissed off. See the guy who got him into the mortgage never bothered to tell him about the variable interest rate…at least he doesn’t remember talking about it. Heard this one before guys? I point out to him that I can probably fix it, no promises of course, but I will definitely try…oh and by the way, the price for me to do so would be the house. In other words, I take the house subject to his current financing, loan stays in his name, and I (as his new property management and debt counseling advisor) renegotiate the terms of the note with the bank.
He gets a HUGE smile on his face. I can save him and he is all for it. His wife thinks I walk on water. I check out the house and it is perfect. It is worth about 55k (remember, I am in that third world nation called Arkansas),and he owes 36k and it needs no repairs to speak of. It will rent for $575 to $600, and is an AWESOME candidate for a lease option for a working class family just starting out; or perhaps over as the case may be.
Now for the beauty part, his mortgage payment is currently 450per month. Not impressive you say? Well, I would be inclined to agree except for one thing, the payment is absolutely “laced” with extras that the mortgage broker set him up with. Things like a “home warranty” for $50 per month”, credit life is another 10 bucks,and then there are a few others so that the total is just over $75 per month. By the time I have all those cancelled by Chase, the payment will be about $375. Now the spread is looking pretty good huh?, Cancel his homeowners and put the house on my commercial umbrella policy and you lose another $25 per month off the payment, and I haven’t even STARTED to renegotiate with Chase.
So, tomorrow afternoon he will deed the house to me and give me Power of Attorney so that I can negotiate the note with Chase. He wins because I will be able to stop the foreclosure, Chase wins because they don’t have to foreclose, The tenant owner I install next week or the week after wins, because he will get into a house with the possibility of owning when he really doesn’t have the credit to go get a loan, and of course I WIN CAUSE I GOT IT ALL DONE FOR NOTHIING! Damn I love this business!
Oh, by the way…..WHAT FREAKIN RECESSION!…..lol
