I was contemplating the current state of the America home owner, you know the Banks…
…and the many challenges of unloading all that real estate they really don’t want and would rather turn into liquid capital, aside from “I’ll take it all” the thoughts were on the hidden opportunity.
A while back I borrowed a book from the library “52 homes in 52 weeks” written by a couple real estate speculators in Vegas trading real estate back in 2004-5 ish. The basic premises of their program was Rent 2 Own, either buy a house or find someone willing to carry the house while a renter paid the mortgage plus extra to be counted as a down payment and licensing fee for the rights to buy the home for a pre-determined amount in the future.
Now as odd as this sounds, I found that Rent to Own actually helps more people than traditional real estate deals ever did. There is some underlying business truth here that I’ll get into in a later post on solving businesses problems for profit, but digressing back to real estate often times the start of the rent to own process was a homeowner with a problem; they could not afford the mortgage.
In step the Rent To Own profiteers, they agree to make the mortgage payments for the homeowners; WIN #1 the home owners get out of a mortgage payment they could not afford. Next our industrious duo, let’s call them R2Duo from here on in, start the search for a rental candidate to take over the mortgage payments that R2Duo are now making themselves. Typically this is someone who does not quite qualify for a mortgage but makes enough money and is responsible enough to keep up their payments. Finding their renters R2Duo structure a deal, the renters will make monthly payments until a predetermined time when they buy the home for a price they agree on now (which is usually lower than the worth of the home at the time they buy it); WIN #2 the renters get a home for lower than it’s worth, years before they could have afforded it; WIN #3 the original home owners sell the home without hefty default charges; WIN #4 R2Duo also make a profit between what they agreed to get the original homeowner and what the renters paid in the end.
You have to love a Win-Win-Win-Win deal.
So here is where this is leading, the banks are dept encumbered with real estate they can’t sell to create liquid cash…you see where this is going…if R2Duo can make hundreds of thousands of dollars selling 52 homes in this manner, creating a cash flow that covers their living expenses and carrying costs you have to ask, are they smarter than the banks?
As always I am Dave Williams, your business steward and I hope you’ve found a valuable idea inside the Idea Vault.