Chris Prefontaine, Annette, and Derek break down rent-to-own and owner-financing deals. They discuss equity expectations of $100-$125k on properties listed around $479k, realtor fees like 1.25% co-broker splits, and how attorney review clauses protect both sides. A 3-year term with extensions and practical fixes like downspout repairs come up too.
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your portfolio as a backup because it can still be your portfolio. It could be in your portfolio for 10 years if you, if you start even at rent only. And who knows?
This one elderly couple moved into an apartment. The apartment rent is very, very close to what they're paying for a mortgage. It's getting to be too much making both.
That will be— that's good for you to know, right? For rental reasons.
Okay. Yeah. And this area, for whatever reason, west of the cities is kind of— you either go way out to the west or you go way out to the east, and both areas are kind of blowing up.
People are—
You take this contingent or does it have to be the same as last one?
No, this one I can take contingent. The realtor did ask if it would be okay for her to continue to market it. I told her the same, where we need to market it at the same price. If she has someone come that needs financing, she kicks it to me. If I get someone that can pay for it traditionally, I kick it to her would be the agreement.
And she also puts in her bottom of her notes, also available rent to own, no banks.
Okay.
Something like that. And she refers it to you. She can make 2 dips here. A side note, you guys, And that she can make 2 dips in the bucket. And that is one, you give her her co-broke fee of 1.25% someday down the road when it sells. But if she refers a buyer to you through her own marketing, you can give whatever you want. But our videos say up to 20 or 25% on payday one.
Okay.
I like it. And you are— that's great with the energy of 2 realtors working with you. I like it. I like that. Here's the only other question I would have. You got a $479,000 price that was canceled. It didn't sell. What are we agreeing on for equity? Because then you literally could go to purchase and sales on this one.
Well, with this one, the homeowners, the sellers would ideally like, you know, that $100,000, $125,000 in equity. So there's still A crap ton there.
Right. But they can wait for it.
But they can wait for it. The, the sellers, though, only want to wait up to 3 years. The realtor will wait beyond that, but the sellers would like it within 3 years.
Can they go to 4?
I'm guessing at this point I would certainly think so because they have— I would just draft action on it.
Just draft it at 3 years but have an extension provision. In there.
Yeah. Classic Rick.
Okay.
And did you say they only will take— they'll take how much equity?
They said, according to the realtor, $100,000 to $125,000.
That's because I did that 95% and 97% came out to $203,000. So you— yeah, that's great. No interest, no payments for 36 months with a possible 12-month, 2 6-month extensions.
Okay.
That this—
here's what I, here's what I did with a realtor on a deal I bought recently is she carried back a note. Same thing. She'll get paid whenever I sell the property. And all we did was have a sliding scale annually. So if I sell it in year 1, she gets what she would've got for commissions, which was like 6 grand. Year 2, it goes to 7. Year 3 goes to 8, so on and so forth. You can do it that way, or you can just do, if she's willing, just straight commission and she doesn't get any interest or any gains if she's willing. Or you can attach, you know, a 6-7% interest rate to her commissions and let it accrue. But I would not want you to be paying payments. to her, you know, she's got to take it tail loaded, in my opinion.
If I'm tracking with you, Derek, what I like with that is the first year or two, we don't likely cash out, but it's a nice perception for them to think, oh, that's great. And, you know, they got it tiered.
Mm-hmm.
I like it.
And the real estate agent here is willing to wait, you know, 5, 6 years if needed.
Awesome.
She really wants this home sold for these sellers.
So you have to— you have to confirm that she's a broker and not an agent, because otherwise her broker is going to have to approve that.
Okay.
And that— just so we don't delay this, today's not— today's what, only Thursday? Please lean on Sue tomorrow or this afternoon if you need help. These are both very standard person sales.
Okay. I'll reach out to her in between.
And then either Derek or I can get eyes on it after you guys do it and just make sure it's copacetic and we're good to go.
Okay. So neither of these at this point would need to go through the new attorney?
I, I don't— I personally don't think so. Derek, you're in the area. I—
well, after talking with Annette about her attorney recently, I— he doesn't impress me much.
Yeah.
So get it done.
I just hired a new one. Actually, there's 2 of them. One specializes in the mobile home side, that sector, and the other one does pretty much everything except the mobile homes. So I hired 2 new ones and the retainer fees are $1,500 each. So much more reasonable.
I think what I told her to do, Derek, since she's been bopping around with these guys, is get our— get our purchase and sales written up. But in the additional conditions, if you're concerned, just put contingent upon Buyer attorney review is your out clause too.
Okay.
Yeah.
Okay.
Just see, not holding this up because that'll be another freaking week with them.
Yeah.
And then what? That gives you an out if my attorney didn't like it.
You know, it's an out clause. It really is.
Yeah. So even if the attorney was fine with it, you could, you could still say my attorney didn't like it.
Intended upon satisfactory review by seller or buyer attorneys. Very broad.
Okay.
People have done that with partners, everything. You know, you can put that language in, you know, get approval.
What was the other thing you were saying, Chris? 90%? You were—
well, I just— while that was talking, I did my normal $479 grand. The market's getting 97% of list. Then you pay a commission of 5%. If you're a seller, You're already down to an equity of $203,000 and this person's saying they'll take $125,000, $100,000 and whatever. Yeah, this is a— she's walking into $50,000 to $75,000.
Yeah.
Well, yeah, full price. This is, this is also in speaking with the real estate agent because I started talking to the wife, to Mary, and Mary said the numbers, the financing, everything is beyond her and they've already worked through it. With their attorney and their realtor. So again, this is coming from the realtor, $120,000 to $125,000 in equity.
Shred it up that way.
Okay.
What do you think the real sale sales price would be if it didn't sell it for $479,000 or whatever?
Under $450,000 conventional?
I was going to say, I think if I wanted to move it quick, probably $439,900. $444,900 commercial.
Okay. And you're going to get it at $238,000 plus $125,000 maybe.
So I-3s.
Yeah.
So rent to own, even if she went out at— picture this, guys— even if she went out aggressively at $459,900 for rent to own, what's the consumer going to do? The rent to own consumer, they got to check the history and go, wow, it's off of $480,000. I'm going to, you know, so it's good.
Yeah.
Good in that.
I'm good on this one.
Good job going back.
Coming from your prospecting? Sorry, Derek. Are these coming from your prospecting or—
These are, these are coming off lists that I purchased. However, both of these— well, excuse me, the current one my VA spoke to. The last one was a referral From oh yeah, that's great. That I'm a VA.
I love variety. Derek, you get a jump in.
Yeah, I looked at the pictures of that first house. It has rain gutters. They've got some raised kind of what what would you call it? Raised landscaping. But there's it's missing a downspout by the front porch on the left side as you're facing the house. And I would I would bet Annette that you go and look at the downspouts. They probably don't direct the water away from the house. They're probably dumping right next to the house, and that's probably exactly where the moisture issues are in the basement. So it could be as simple as just putting downspouts on this thing and getting the water four or five feet away from the house. It already looks.
It already looks tension.
Yeah, yeah. It already looks like it's picked up plenty high from the picture.
Okay.
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So check the downspouts, see where they're dumping, and then say we bring this property on to our— well, either way, but extend the downspouts out, I'm assuming this spring, or should I do that now with some of the melting going on?
Well, You got to get it closed first.
Yeah.
Well, yeah, you got, you got less than a— yeah, you got less than a few hundred dollars. And that's if you went with fancy aluminum. You could put plastic on there for probably under $100.
Okay.
And then that when you say own portfolio, in my opinion, given I know all your situation, I would aggressively get after this for rent to own for cash and then owner financing and then, you know, Your portfolio is a backup because it can still be your portfolio. It could be in your portfolio for 10 years if you start even at rent only. Who knows?
