By: Dennis Norman
This is the final part of my 3 part interview with David Simmons, a Kansas City investor specializing in putting together turn-key rentals for investors. If you missed part 1 click here , for part 2 click here.
David, what is the “exit strategy” for the investor? There are several exit strategies the investor can look at when the time comes to sell. Often the tenant leasing the house is interested in purchasing the home they live in. We have many mortgage broker contracts that can help the tenants begin credit repair, etc., to get them in position to buy when the time comes. ,
Another exit strategy is the lease/purchase option. This is an exteremely profitable business model. Let’s illustrate this in an example:
The investor buys the house from us for $50,000. They contract with us to rehab it and let’s say in this example the rehab cost is $35,000. The investor ends up with $85,000 in the house after rehab. The appraised value in this example is $125,000 so the investor starts out at 70% of value with $40,000 in equity. The house is then sold on a lease/purchase at $125,000. The lease/purchase buyer would sign a 3 year lease with a purchase at the end of the term. This is a great opportunity for both the investor as well as the buyer. The investor has a nice profit locked in and the buyer has a good price locked in…even if the house apreciates significantly during the 3 year period the buyer has their price locked in.
OK David, in addtion to providing information to our readers you are also doing a little self-promotion which I think is OK as I feel you have helped many investors in a fair, honest and ethical way, but what about the investor that wants to “go it alone”? Do investors really need to work with someone like you in order to be successful? Investors could surely go it alone….I do not recommend that route however. Even if it is not me that they contact they should contact someone that has the local market knowledge and experience to guide them properly. Beware of “false prophets” however! I receive advertisements every week from so called “professional investors” offering property in the same neighborhoods as I do only at 100% of vlue instead of my prices! For example I have homes for sale in a south Kansas City neighborhood that I am active in that I sell at $75,000 turn-key and I have received flyers from others selling the same homes for $95,000!
I have the Kansas City market for over 6 years and have completed millions of dollars in rehab work. I have mortgage and banking contacts and can recommend appraisers, title companies and rehab insurance companies as wel. Again, I buy the houses at significant discounts in most cases on the court house steps direct from foreclosure trustees thereby cutting out the middle man and pass the savings along to my investors. Additionally, when we rehab we do so efficiently and with quality! (click here to see before and after photos of a recent rehab managed by David)
If you have questions for David please feel free to post a comment or email him directly at KCForeclosures@yahoo.com.
Authors note: In the interest of full disclosure, David has been a partner of mine on real estate deals and this is how I got to know him. However, I would not feature him or anyone else for that matter, that I did not feel was an expert in their field with good business ethics in my articles. I have future interviews planned with various professinals throughout the country. If you feel you have something to offer that would be helpful to the real estate investor please post a reply and I will contact you to learn more about you and what you do.
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