OK, you guys might be right about the SMART act but consider this; the problem is who carries out the transaction – not who funds the transaction. If you had a SMART act compliant office do all the legal work, disclosures and all of that, you would be fine being the investor in the note – which in our case would be a owner carry-back. Where you run afoul of the law is if you just go out and do the transaction on your own.
For years I was a trust deed investor. Another name for it is hard money lender. I knew a mortgage broker who would call me up when he had someone who needed a bridge loan that the banks turned down and was willing to pay a high rate of interest and put up real estate as collateral. All I did (besides my due diligence) was sign some papers and write a check. The mortgage broker and title company did all the legal work. If there was some regulation broken, it was on them, not on me.
Today such brokers need to be SMART compliant. I was hunting for such a broker – one that did private money deals and was SMART compliant – when I came across the attorney who told me he could do the transactions for me and stay complaint with the law. He does the same thing for other parks, and it was a park owner who recommend that I call him. I would prefer to have a mortgage broker handle the transactions for me, but I was unable to find one in South Dakota. I would guess in Texas you would have no problem finding such guys – just talk to the title companies and ask them who does the private money deals in the area. Title companies see everything.
Now, on to fatal flaw with the Rent Credit program and why I think (hope) it will be better selling the homes.
It is always the case that among those people who are looking for a place to rent, are a relatively high percent of people who’s lifestyle is one of moving through other people’s property and leaving a trail of destruction behind them. But of course, as a landlord, you know this to be true. As a seasoned landlord, you also know, these people are very good at hiding their true nature. So good, that despite your best efforts at filtering them out, they do get through from time to time and become residents in your homes. The damage they have done to your business and your property by the time, 6 month -12 months hence, when the Sheriff escorts them off your property and you change the locks, is so great that it wipes out whatever little profits you’ve made off the other POHs with more stable residents. Sometimes they even leave behind a home that was OK when they moved in but is now ready for a trip to the Mobile Home Graveyard.
These people are the number one reason why POH rentals are not profitable.
The problem is, when we rent, we have to charge a deposit that is unrealistically low to cover the damage that could very well be let behind when they move out. Charge more and you will never find a renter willing and able to pay it.
But – this is my theory – if you sell a home and require, let’s say, a $3,000 to $4,000 down payment you will effectively filtered out these destructive fly-by-nighters, because they tend not to have that kind of cash put together and they know they are going to be kicked out in a year or so. And while no one will pay a $3,000 to $4,000 security deposit on a low income rental unit, there are people who will put down that much to purchase a home.