Lease to Own – A Great Short-Term Solution

December 23, 2008

By Brian Short, CMC, CRMS, GMA 

A long-time friend of mine called me this week about his desire to help first-time home owners or troubled borrowers get into a house of their own – even when mortgage loan options are at their lowest for the past 30 years. 

house-for-saleThere is a glut of inventory on the Real Estate market, streets lined with motivated sellers, nearly unprecedented low interest rates and complexes full of renters who want to get out and start something for themselves.  These prospective home owners want their chance to build home equity, experience the freedom which comes from home ownership and to move out on their own. 

What is the solution: Investors buying discounted houses at fire-sale prices, with rock bottom interest rates and then selling them to prospective buyers with a lease-to-own arrangement.

I still contend that an insurgency of Real Estate investors are the ones best qualified to pull the Real Estate market out of its 18-24 month tail spin. 

Why? 

 There is money to be made in Real Estate even in 2009! 

Why? 

1. Historically low fixed interest rates available even to those who will not live in the houses they might be buying.

2. Historically high number of homes on the Real Estate market needing to be sold by very motivated sellers – most of these homes are still in great shape and need little or no fixing up!

3. Historically high number of recent high school or college grads, newly married, or those who have recently had a child who have come to expect that they should be able to buy a house when they move out on their own.

With the recent lowering of the price of gas and the upcoming change of administration in Washington DC, many will be sensing a renewed interest in moving past the rough times of 2007-2008 and be interested in exploring home ownership. 

As I explained to a friend yesterday, all current mortgage loan programs will require 3-5% down payment for any buyer who desires to buy a house in this market.  No mortgage company will be able to change that scenario for the time being. 

Therefore, those who have not saved up their down payment or have glitches on their credit or employment history need time to let those characteristics heal.  A lease-to-own arrangement with a seller is a great way for them to put down some roots, build up some payment history, develop a longer track record on their job and work at paying off or cleaning up some past debt obligations necessary for qualifying for long-term institutional financing.

I have spent hours over the past ten years counseling prospective borrowers who desire to buy a house on my step-by-step plan to pull them out of their specific situation to prepare them for long-term financing.  Most people can be successful with this uniquely tailored plan in 2-3 years as long as they have steady income throughout that time period and remain firmly committed to bettering themselves and righting many of the wrongs of their past.

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Guaranteed Retirement???? By Whom???

November 26, 2008

 By Brian Short, CMC, CRMS, GMA

private_jetThere still seems to  be much discussion about what should be done to or for the “Big Three” US Auto Makers (affectionately referred to in some circles as “The 3 Little Pigs”) who arrived in Washington, DC earlier this month stepping off their private corporate jets with a tin cup in their hands.  My private conversations with friends and family members have reflected some of the uncertainty and complexity of the thoughts and comments being circulated in the media and among our elected politicians who are admittedly “over their heads” on this one!  (I told one friend a few weeks ago, “Suit me up and put me in.  At least I understand the mortgage industry!”  Not a bad place to start for those who are trying to figure out this current mess!)

Many of the comments I have been hearing vacilate between one or two of the following positions:gmassembly-300x300

“They’re too big to let fail!  Nearly 25% of all jobs in the US are in some way related to the US auto industry!”

“Let them go under! The unionized US auto worker is costing almost twice as much at those who work for Japanese, German or Korean auto companies.  This is the only way to bring the UAW back to the negotiating table to restructure and reorganize.”

“The US government made this mess by over-regulating our auto industry when the foreign companies could continue to use their standard practices and make better cars, cheaper.”  They are blaming the increased government regulation for the collapse of the US auto industry as many of us have suggested when looking at the current condition of the US mortgage industry. (This seems like a reoccurring theme.)

The comment I overheard recently which really caught my attention was one where she said, “But what about those retired UAW workers who were PROMISED their retirement?  If we let the US auto companies fail all of those retired folks will lose their retirement!”

financial-advisorThey were “PROMISED” retirement pay?  Someone guaranteed them a certain level of pay during the rest of their days on this earth, just because they put in their “30 years”?  This guarantee was made with no respect as to the condition or continued viability of a company which has not yet successfully made it into the 21st Century in terms of what the consumers are demanding and what current levels of domestic fuel types can propel?  

Who made these promises?  What gave them the right to do so?  They are still cranking out under preforming, overpriced, inefficient machines causing us to remain attached at the breasts of foreign governments lactating their crude oil and holding us hostage to their tyrant policies directed at crippling our government, the balance of trade and our standard of living. 

They “PROMISED” them retirement?  What was guaranteed?  What is it that my buddy with Edward Jones always says?…..” Past Performance does not guarantee future results.”  Whose retirement is guaranteed?  My parents have surely seen their retirement account balance dwindle over the past several months – The Dow-Jones has fallen16% since the Presidential election!  They will likely never see their accounts recover fully to what they were prior to this most recent downturn.  My retirement is not guaranteed – assuming I EVER retire!

Retirement benefits can never be ethically “guaranteed” to anyone!  Just as your financial planner is stocks_downrequired to say – your money will only last as long as the companies or governments in which you have bought an interest by securing stocks or bonds – or funds made up of those stocks or bonds – successfully operate.  If they fail, your interest (stock, bond or fund) will also fail.  That’s life in the REAL WORLD! 

Why should the American taxpayer be assumed to be on the hook for unethical promises or guarantees made by those doling out the UAW retirement funds when they, most likely, contributed to the failure of the US auto companies and their employee’s retirement funds?  Who is going to bail me out if my retirement fund fails? Or my parents if their retirement fund fails?  Do they deserve “full retirement” even though their companies where they they had an interest performed poorly or possibly failed?  Of course not!

dec-of-independenceRetirement is NOT GUARANTEED!  Neither is equity in ones home.  We’ve certainly seen that lie ruin a few million people this year!   Our founding fathers wrote that we were guaranteed “life, liberty and the pursuit of happiness” because those “inalienable rights were endowed by our Creator.”  Some have argued that this list of “inalienable rights” should be expanded to “include freedom of speech and expression, freedom of religion and conscience, freedom of assembly, and the right to equal protection before the law.”

Those who have been persuaded to expand this list even farther to include: minimum mage, government health care, guaranteed retirement, home ownership, never-decreasing home equity, a job you love, a spouse who always loves you, kids who never disobey, and a boss who always puts the care of his employees ahead his own bottom-line will surely bring this country and our free-market economy to its knees. 

Life is full of risk.  Some lose and some win – even on a level playing field.  What we’ve been rightly runningpromised is the opportunity to get back up, dust off our knees and start running AGAIN!  Being pushed down once, twice or hundreds of times doesn’t mean that we’ve lost.  We lose only if we remain on our butts and never get back up. 

You mean we can keep running?  Now, that’s a pretty sweet guarantee!