- Joined
- Oct 25, 2007
- Messages
- 21
So you`ve been guns to the wall on Ron LeGrand`s system and your finally getting a property or two that you either have or might get under contract. Now you need to install a "qualified" tenant/buyer (T/B). To me, "qualified" means they stand a very good chance of getting their own "take-out" mortgage approved in some time frame so that you can achieve your "back-end" profits and satisfy the mortgage holder. Being a mortgage broker, this comes easy to me and I have already been through this and have developed a very graphical and intuitive method of determining the "constraints" or issues the T/B faces. I now know how to properly "size" the T/B and that gives me a lot of confidence and comfort knowing that I am working with the right T/B and I can present a road map for them to get from today to the take-out. They still have to execute the plan and bet on themselves to succeed, but it`s they who are writing the deposit cheques and they are more apt to buy-in if they see their own exit (i.e. take-out). Now I am at the stage where I am polishing the plan output to something very presentable to the T/B. So my wife says to me, what do other QT investors do and I got to thinking maybe I should put this out for some feelers. Here`s the process I follow so far:
[list type=decimal][*]First screening using information from a tenant/buyer questionnaire in my model that takes into account income, income growth, current debt load, unpaid collections/taxes, available down payment, available max for rent and rental premiums, interest rates projected at lease end, required closing costs, TDS or total debt service ratio today (I don`t want them over 50% or too tight), market rents for various property prices, and term. These are all mapped to CMHC and Genworth requirements to qualify for their 5% down payment programs (the take-out hurdle)[*]Next is a consultation with the client to determine real constraints, flexibilities with the output being the maximum priced home they can afford today and at lease end. Sometimes, client has to work on a few things, such as reducing debt load, saving for DP, etc. and they go away for now. Other times, they pass the screening and move on to step 3.If still OK, full application and credit pull to confirm representations made on the questionnaire. Now I am hunting properties for this client. [this is where we are now - we`ve got houses under contract and "qualified T/Bs, but no property matches yet]When client settles on a property, I will ask them to provide support documents for their application, just as if this were a live mortgage. If all checks out, I will then finalize the T/B execution plan or road map and sign-em up![/list type=decimal]
Anyway, Ron says call your local mortgage broker and put them to work for free! Hey it costs us money (credit pulls) and chews up significant time. Further more, how do you, the investor, interpret and convert the output into an execution plan? Maybe there is a service in need of development? What do others do? Anyone got that far yet?
[list type=decimal][*]First screening using information from a tenant/buyer questionnaire in my model that takes into account income, income growth, current debt load, unpaid collections/taxes, available down payment, available max for rent and rental premiums, interest rates projected at lease end, required closing costs, TDS or total debt service ratio today (I don`t want them over 50% or too tight), market rents for various property prices, and term. These are all mapped to CMHC and Genworth requirements to qualify for their 5% down payment programs (the take-out hurdle)[*]Next is a consultation with the client to determine real constraints, flexibilities with the output being the maximum priced home they can afford today and at lease end. Sometimes, client has to work on a few things, such as reducing debt load, saving for DP, etc. and they go away for now. Other times, they pass the screening and move on to step 3.If still OK, full application and credit pull to confirm representations made on the questionnaire. Now I am hunting properties for this client. [this is where we are now - we`ve got houses under contract and "qualified T/Bs, but no property matches yet]When client settles on a property, I will ask them to provide support documents for their application, just as if this were a live mortgage. If all checks out, I will then finalize the T/B execution plan or road map and sign-em up![/list type=decimal]
Anyway, Ron says call your local mortgage broker and put them to work for free! Hey it costs us money (credit pulls) and chews up significant time. Further more, how do you, the investor, interpret and convert the output into an execution plan? Maybe there is a service in need of development? What do others do? Anyone got that far yet?