Posted by Dale-Ohio on February 21, 2006 at 19:56:54:
WoW Sounds a little complicated. but after all is said and done, where do YOU make money. Cause i do the same thing without the investors. Its all in my lap. loan, down payment, rent profit, purchase of house or Buyback. sounds like a lot of people involed. Im not saying thats a bad thing, it may be better than what im doing. Its souds great and it seams like its worked for you. Oh, and thanks for the reply. Dale-Ohio
Dick Chelten’s Method of Investing - Posted by ED_Illinois
Posted by ED_Illinois on February 20, 2006 at 12:48:02:
Mr. Chelten, I hope you don’t mind me using your name here…
Anyways, I read the archives and found the website (Mr. Cheltens - www.marketplacehomes.com)
So the method goes like this - find tennant buyers with decent money down, find a home for them and then sell to them.
The property is being bought at or close to the market value, so I’d think that’s risk #1.
Secondly, though 5% option money is not a small amount, but if things go wrong (at least in my state), that money would barely cover the mtg payments in case I need to evict. Worst case, I’ll have to refund it.
So questions for you guys. Anyone using this method with success? Do you use ONLY this method or supplement it with a rehab or a wholesale flip here and there?
I’ve also tried running ads, but most buyers with funds are a little nervous when they find out that their option fee is non-refundable and unfortunately, I don’t have too many success stories of my own to back up my claims.
What should I do in the beginning to find quality tennants?
Thanks,
Eugene
Re: Dick Chelten’s Method of Investing - Posted by Dick Chelten
Posted by Dick Chelten on February 20, 2006 at 20:31:24:
Wow! My name in lights!
Eugene, feel free to call me to discuss my program whenever. You can get my number from my website, www.marketplacehomes.com.
Our original model had us purchasing homes for 5% under market value and assuming a 5% annual appreciation for 2 years. Given today’s flat Detroit market, we now purchase at 10% under a current appraisal value plus receive a 5% option fee from the tenant/buyer for our same 15% profit spread.
Over the last 3 years, while we created this model, we have aided 70 families into their dream homes, rent to own. Our models continue to evolve, and differ in one geographic area to the next.
Recently, I purchased a home outside Charleston, SC. In the last 6 months, the home we purchased for $247k is now worth $297k. Our buyer?s option price is $284k. It’s easy to business in areas where the tide is rising; that we can predictably make money in a flat Michigan market confirms our model’s structure.
We don’t buy homes first and search for bruised credit buyers thereafter. Rather, our model is geared at finding bruised credit buyers first and only then helping them find their dream homes. We negotiate our purchase price, then lease to our tenant buyers who understand that we bought their dream home because they said they wanted to buy that particular home. You bet I tell them that if they don’t pay, I will evict them and they will lose their option fee. I’m providing short term financing for their dream home. Look at our testimonials, TV pieces, and newspaper articles. It really works.
There are ways to work with Realtors, builders and mortgage elnders to find Tenant/Buyers. But, the main thing is to stop thinking like a landlord and more like a banker.
Good luck.
Dick Chelten
Re: Dick Chelten’s Method of Investing - Posted by Dale-Ohio
Posted by Dale-Ohio on February 21, 2006 at 09:25:35:
Well i am doing this in Ohio now. But i seem to get limited by loan companies, saying i can only purchase a certain amount of properties. Of, course i am doing 100% financing. But if i dont, then How am i going to make any money? Just off the rent? Or am i making money off the Option fee? If i have to put money down, then there goes the option fee.
Re: Dick Chelten’s Method of Investing - Posted by Wayne-NC
Posted by Wayne-NC on February 21, 2006 at 07:47:00:
I had that same idea a while back meaning a few years ago. I had a lot of irons in the fire at the time but by reading your success, I sure wish I acted on my hunches. You proved that my thinking was correct. I may still pursue that idea again as my market is still appreciating although not as fast as before.
Re: Dick Chelten’s Method of Investing - Posted by Dick Chelten
Posted by Dick Chelten on February 21, 2006 at 15:31:25:
We use investors with available 10% cash and closing costs and good FICO scores to purchase the homes our clients want. Then, just like Walgreens, CVS, and others, we net lease from the Investor and sublease to the tenant buyer. We don’t have to use our cash nor credit and can buy as many properties as we need with Investors lining up to earn the 16-40% return we pay.We can guarantee the return since we state the fee we pay (40% times down payment and closing costs) and guarantee the maximum exit time frame (12-30 months). Ergo, 40% divided by 1 year = 40% ROI. 40% divided by 2.5 years (30 months) = 16%.
These aren’t securities, but rather income produsicng real estate properties bought by high income investors.
You can see our model under the Investor section of my website.
Dick Chelten