PLP-058 Foreclosure Journal: Episode 4 – A New Exit Strategy
Just when Keith thought he had it all figured out, he found a new exit strategy for the property he and his partner landed. This fourth installment of the foreclosure journal documents is about how Keith and Landon made a property more profitable than reselling it with owner finance, taking a down payment, and coming up with a note. Find out more as he walks you through how it happened.
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Listen to the podcast here:
Foreclosure Journal: Episode 4 - A New Exit Strategy
Just When I Thought I Had It All Figured Out
I’ll be speaking or giving you part four of my Foreclosure Journal. I’m going to be telling you the rest of the story.
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In the past three editions of the Foreclosure Journal, I’ve talked about how my partner and I got into the property. What happened? What went wrong? Hurricane Harvey. We let the guy stay for over a year with no communication from him. Ultimately, we consulted the attorney and we had him take care of the foreclosure process on our behalf. What finally happened? The foreclosure went through. Nobody bid on it because the ask was high. It didn't make sense picking it up at the foreclosure auction for several reasons. Mostly, there wasn't enough equity in the home. We got it back, which is fine. It's still in bad shape, about the condition it was in when we bought it. However, we have a new exit strategy that in a perfect world, it should prove more profitable than reselling it again with owner finance and taking a down payment and then coming up with a note. What had happened was against my initial feelings and flashbacks to my landlord. We've turned the property into a rental. Yes, it's true. I want to walk you through at least how I was sold. All the credit goes to my partner, Landon's team, his office who found a new couple that has some interesting needs and there's some synergy here with us.
Once we got the house back, Landon's team found a new couple. I don't know how young they are exactly but apparently, they’re new. They’re maybe divorced, having some credit issues. I’m not exactly sure. However, they run a contracting business and want to rent this house for its garage on a lease option program with it. We've got all the documents. We have our lease that stipulates some pretty wonderful things including inspections. We ended up trading services in lieu of a deposit. It all worked out because we found this couple. They're going to rent it for a year. We have a contract, a lease for a year at $650 a month in rent. The security deposit normally would have been at least $650. We put it in the contract that the tenant had to have the property trashed out, the yard mowed, the three cars removed from the front yard, all the junk out of the backyard and the floor is swept before they could move in and get the keys and take possession. We were able to confirm that. They held up their end of the bargain, so now the property is not going to get letters from the city and other municipalities for various code violations. We are renting. We're going to depreciate and take advantage of some of the depreciation on that property for this first year.
My friend, Michael Plaks, always says you should consider converting rental properties into owner finance or seller finance properties because it is much more beneficial for you tax-wise. I’ve got to run that back down. I knew that in the back of my head that this would probably be a decent move if we can get some good renters who are serious about wanting to become owners in the next many months. We can depreciate the property lease up and I need to fact check that with my CPA because you never know these days. Every time you turn around, something’s new. I believe at least the last time I looked, we can still depreciate the property which might not be much but every little bit that goes to helping me avoid taxes,