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Does simply renting make sense?
Renting your home is an option when you cannot sell, but there are many pitfalls that you should be aware of.
Renters in general are poor at paying on time, will not keep the property in top shape, will keep poor maintenance , and the move out
on a whim, leaving you with a vacancy to fill.
If you think that simply renting your house will solve your problem, you should be aware of the cost of renting. There are
repairs to be made, maintenance, and the vacancy factor. People come and go. You will not immediately fill the home when vacant.
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Property Value:
Market Lease:
PITI:
Vacancy Factor:
Repairs and Maintenance:
Net rent per month:
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$400,000
$2500
-$2300
-$450
-$400
-$650
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(Note: the examples above are for purely illustrative purposes only to reflect what could happen. Each property will be different.)
An example of how we would do it:
Take the same property example above, using our unique "
Equity
Holding Trust Transfer
" method and notice the results.
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Property Value:
Asking Lease:
PITI:
Vacancy Factor:
Repairs and Maintenance:
Net rent per month:
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$400,000
$2500
-$2300
-$0
-$0
$200
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(Note: the examples above are for purely illustrative purposes only to reflect what could happen. Each property will be different.)
As you can see, you are
getting around $850 more per month
than you would if you simply rented the
property. Plus, no midnight calls to repair toilets, no need to hound the tenant to mow the lawn, etc. We
will do 100% of the repairs and maintenance on your house. The tenant buyers are long term lessees, plus, a
contingency fund is kept to pay the monthly payments, if, for some reason, the tenant moves out (very rare).
Some of the benefits of using the
"Equity Holding Trust Transfer"
method:
-
A legitimate
"takeover"
of one's existing loan payments, without loan assumption or violations of the underlying lender's alienation and
"due-on-sale-" admonitions.
-
Freedom from loan payments
which may no longer be affordable, as well as the cost of insurance and general maintenance.
-
Enhanced income and profit potential, compared to what
straight renting or leasing
could provide.
-
The ability of the homeowner to transfer income tax benefits and other benefits
of ownership. Increasing the net income from 70% of straight lease to 100% or more, very favorable to the
lending institution for acquiring other properties.
-
Protection from possible injurious or malevolent actions of the "other party", due to
the recourse and tough penalties built into the system.
-
The easiest collection of a resident's payments; handling of
disbursements to creditors; mailing to late notices; and processing any necessary admonitions, evictions or other legal process -
the seller need never to handle these functions
.
-
Ease of eviction and avoidance of the time, anguish, and expense of
judicial foreclosure, ejectment
and quiet title actions to regain entry and possession following a tenant's default.
-
Partition of the profit potential to be derived from a future sale, while, in
the meantime, someone else pays all the bills.
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Deferred Capitol Gain tax on rental property or property held less than 2 years out of
5. You will not pay the Capitol Gain tax until the termination time.
When to consider just renting
Would it make sense to simply rent if you had a large spread between your mortgage payment (PITI) and the rent you could
collect. Yes, it could, if you are ready for dealing with vacancies, repairs and maintenance. Look at these results.
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Property Value:
Asking Lease:
PITI:
Vacancy Factor:
Repairs and Maintenance:
Net rent per month:
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$400,000
$2950
-$2100
-$450
-$400
$0
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If, in your rental market, you can get about 30% higher rent than you PITI payments, you will break even. Anything less than that you
should consider the Equity Holding Trust Transfer method.
How the Equity Holding Trust Transfer Works (Simplified)
In the simplest form, we will ask you to place the property into
an Illinois Equity Holding Land Trust for the protection of the property and for your protection from "other parties".
This is fairly similar to the Illinois Land Trust President Obama had on his Chicago home. In a separate action, we will be
named beneficiaries of the trust. The resident party will then sign a comprehensive Occupancy Agreement that
dictates their responsibilities.
The trustee, Equity Holding Corporation, a non-profit corporation, holds a contingency
fund (1 or 2 payments) to make sure that each monthly payment is made on time. They collect the lease from
the resident and pay all mortgage payments.
Since no sale will transpire until the end of the agreement, usually in 2 or more years,
the "due on sale" clause is not violated.
Unlike a lease option, lease purchase or other "Seller carry" scenarios, if a resident stops
paying, it is a simple eviction. We handle the eviction at our cost. In a lease-to-own situation, it
is not uncommon for a resident to claim equity and force a judicial foreclosure. For our method, in the eyes of
the court, this is just a lease arrangement.
This is a beneficiary directed trust; the trustee cannot do anything without the approval of all beneficiaries.
That is it in a nutshell. If you would like to pursue this further simply send us a request to
learn more by filling in the form below.
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