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Driscoll Enterprises Inc.

Investing in You and Your Future!

 

Issue 35 - May 2014
In this issue
Personal Notes
Education Corner - Lease Options
Industry Related News - Projected 5 Strongest and Weakest Housing Markets
Projects and Opportunities
Laughs and Interesting Stuff
Dear Family and Friends, (by Kevin)  

 

Hey, what a great month May has been.  We started off the month with a trip out to Denver to attend a class on raising private money to help us do more real estate deals.  However, the highlight of that trip was when we drove down to Mary Jane's parent's house and spent a couple of days with her mom and dad.  We also got to see one of her sisters and brothers.

 

Even though it was early May it was wicked cold.  When we landed and the wind was coming off the mountains at 40 - 60 mph.  That first evening when we were driving from her folk's house to the hotel we experienced a short lived blizzard.  I love snow, but to watch, not to drive in.  Anyhow we survived and were very thankful to have the opportunity to spend time with Mary Jane's family.

 

A couple of weeks later we drove up to Hartford to network with fellow investors interested in investing in multi-family properties like apartment houses.  It was terrific fun being around people who are believers and get the fact that apartment complexes can build long term sustainable wealth.

 

We are all doing great.  The Lord continues to bless us with good health, food on the table and meaningful work to help us support ourselves. 

 

We hope everyone had a great Memorial Day weekend and spent some time reflecting on those who gave the ultimate sacrifice so we can enjoy the many blessings we receive each day of living in this free country.  As a veteran I know more than most that war is not a glorious thing, it is about breaking things and killing people.  So in my mind there may be necessary wars but there are no good wars.  In any case, I believe we owe it to our veterans to give them the respect they deserve.

 

We have a vacation to Maine coming up in August, I am really looking forward to that.  They say that the anticipation of a vacation may be as good for your spirit as the actual vacation. 

 

This month's quote: "It's the funny thing about life: if you refuse to accept anything but the very best, you very often get it." - Somerset Maugham

 

Kevin and Mary Jane

Education Corner

(By Kevin)

 

What is a Lease Option?:

 

One of the great things about coaching people with Real Estate Investing is that it provides great questions that can be answered in our newsletter and blog.  So what exactly is a Lease Option?

 

If done right, (check your local laws I am not an attorney), a lease option is a great way to purchase or sell a home.  It is especially effective if a seller needs to get a home occupied quickly and really wants to sell it but doesn't want to go through the inspection and full qualifications processes banks use.  It is a great opportunity for a buyer who can afford the payments but may have weak credit or needs to sell their previous home before they can qualify for a new loan.

 

How it works:

 

It generally requires two documents, a lease and an option to purchase the property at a specific price before a specific date.  The seller leases the property for a set period of time, usually 1 - 5 years.  The seller, for a fee, gives the lessee the right to purchase the property within a specified time period for an agreed upon price.  This fee can be any amount agreeable between the owner and the lessee.

 

The option fee may or may not apply to the purchase price of the property and is never refundable.  In other words, if the lessee doesn't purchase the home within the agreed upon time frame, they do not get the option fee back.  This should be clear in the option agreement.

 

It is important that the documents are separate and that the lease document does not reference the option contract because some courts have concluded that the option fee or payments with credit towards the purchase price give the lessee "equitable interest" in the property.  "Equitable Interest" may mean you need to foreclose rather than evict if things go poorly.

 

We use this method to lease out homes in one of our manufactured housing communities.  Given the price point of these homes we generally get $1,000 - $2,000 down as an option fee.  Since the lessee has indicated a desire to purchase the home we also stipulate that the lessee will be responsible for all repairs and maintenance less than say $350.  This method has worked well for us so far.

   

Sandwich Lease Option: 

 

A Sandwich Lease Option is an effective way for investors to build a portfolio.  Ideally here is sample of how this might work.

 

The property owner, party "A", leases the property to party "B", who just happens to be an investor, for $1,000 per month for 5 years.  For this to work properly party "B" must ensure that they have the right to sub-lease the property.  

 

There is also an option signed to sell the property to party "B" anytime within the 5 year period for $200,000.  The option cost is $5,000.

 

Party "B" then finds someone else, party "C", who wants to lease the property for $1,200 with an option to purchase it for $220,000 anytime in the next 24 months.  This option fee was $6,000.

 

In this example party "B" is then able to pocket $200 per month and gets all their money back from the option fee they paid plus $1,000.

 

In the end, does party "B", the investor, have any money into this deal?  No!  Sweet deal!

 

Why did we limit the end lessee to 24 months rather than the full 5 years?  If party "C" cannot close within the 24 months party "B" will have some options.  Party "B" can extend the option agreement for an additional fee or find a new person to put into the property for 24 months.

 

If party "B" is smart he/she will keep great records of payments received as proof to the bank that party "C" can make the payments.  Furthermore party "B" will work with party "C" to help ensure they can close on the property within 24 months.  This may include connecting them with good credit counselors and/or encouraging them to get rid of other debt so they can qualify for the new loan.

 

It should be noted that about 70% of all lease options are never actually exercised.  We believe this is due to the fact that the right expectations were not established at the beginning of the transaction.  The lessee must really want to purchase the house and understand that it can truly be their home. 

 

When an investor uses a Sandwich Lease Option to secure a property it is in her/his best interest to put as little money into the option as possible and get the term of the option as long as possible.   The exact opposite is true when the investor is trying to lease out a property this way.

Industry News  

(by Kevin)

 

Veros Real Estate Solutions (Veros), an industry leader in enterprise risk management, collateral valuation services and predictive analytics, has found that while residential real estate appreciation trends continue to march up steadily, the previously rapid acceleration of values is starting to slow down.

 

The following table presents the projected top 5 strongest markets and 5 weakest markets for residential real estate in major metro areas for median priced single-family homes (SFH) in those markets.

 

Projected 5 Strongest SFH Markets

 

1

San Francisco-Oakland-Fremont, CA

+13.4%

2

San Jose-Sunnyvale-Santa Clara, CA

+10.7%

3

Seattle-Tacoma-Bellevue, WA

+10.2%

4

Los Angeles-Long Beach-Santa Ana, CA

+  9.6%

5

Midland, TX

+  9.5%


 

Projected 5 Weakest SFH Markets

 

1

Atlantic City, NJ                                       

-1.7%

2

Kingston, NY

-1.7%

3

Fayetteville, NC

-1.3%

4

Norwich-New London, CT

-1.2%

5

Rockford, IL

-1.1%

  

- See more at: http://www.veros.com/news/2014/01/veroforecast-finds-property-appreciation-nearing-peak/#sthash.BiitNQ0J.dpuf

 

 

Projects and Opportunities 
  • 8% - 20%+ ROI: We are continuing to locate used mobile homes, set them up in one of our Manufacture Housing Communities, and sell/rent them.  If you have between $15,000 and $20,000 you want working harder for you then this could be the right opportunity for you.

We will do all the work and can manage the home for you totally turn key or you can place one of your homes in our community and manage it yourself.  We are very flexible with these opportunities.  

 

We only do 3 of these per month so let us know your interest as soon as possible so we can more fully explain the  process and get your name on the list.

 

Did you know that you can invest in real estate from your IRA or other retirement account?  You can also use your stock portfolio to invest without ever selling your stock? (Think leverage, leverage, leverage!).  These investment secrets aren't well known but they are perfectly legal.  Contact us and/or click on this Investment Secret link to learn more. 

Laughs and Interesting Stuff 

(Kevin and Mary Jane)  

I'm the BOSS!

 

Arcelor-Mittal Steel, feeling it was time for a shakeup, hired a new Chief Executive Officer (CEO).


The new boss was determined to rid the company of all slackers.

On a tour of the facilities, the CEO noticed a guy leaning against a wall.

The room was full of workers and he wanted to let them know that he meant business.

He asked the guy, "How much money do you make a week?"

A little surprised, the young man looked at him and said, "I make $400 a week. Why?"

The CEO said, "Wait right here." 

 

He walked back to his office, came back in two minutes, and handed the guy $1,600 in cash and said, "Here's four weeks' pay.  Now GET OUT and don't come back."

Feeling pretty good about himself the CEO looked around the room and asked, "Does anyone want to tell me what that goof-ball did here?"
 

After a long pause...............

From far across the room a voice said, "He was Pizza delivery guy."


Ramblings of a Retired Mind

 

- Did you ever notice: The Roman Numerals for forty (40) are XL.

 

- You know, I spent a fortune on deodorant before I realized that people didn't like me anyway.

 

- I thought about making a fitness movie for folks my age, and call it 'Pumping Rust'.

 

- When people see a cat's litter box, they always say, 'Oh, have you got a cat?'  Just once I want to say, 'No, it's for company!'

 

- I was thinking about how people seem to read the Bible a whole lot more as they get older.  Then, it dawned on me.  They were cramming for their finals.

 

- As for me, I'm just hoping God grades on the curve.

 

- The older you get, the tougher it is to lose weight, because by then your body and your fat have gotten to be really good friends.

 

- Did you ever notice:  When you put the 2 words 'The' and 'IRS' together it spells 'Theirs...'

 

- Aging: Eventually you will reach a point when you stop lying about your age and start bragging about it. 

-----------------------------------------------------------------------------------  
Keep On Smiling!

(so people will wonder what your up to AND its contagious) 

 

We are always willing to share information with you so please feel free to contact us

 

Driscoll Enterprises Inc. 332 West Lee Hwy., Suite 200, Warrenton, VA 20186

703-398-1188 or 800-887-0001

[email protected]

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