First, these clients joined the membership then they moved into one of their properties.
Once they move in, Lou’s group needs to make sure that the clients are taking good care of the property, thus having an annual inspection.
The annual inspection is done 90 days before the expiration of the client’s rental agreement.
Whenever someone is having a “rent to own” agreement with Lou it means that there are 2 agreements that exist.
One is the standard “rental agreement”. The other one is the “option agreement” which provides the tenant the option to purchase that property.
If you are someone who is looking to become a homeowner watch this video and learn the Path To Homeownership Program.
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It’s an all-day training in the comfort of your own home where Lou is going to teach you how to find a buyer before even finding a property. He’s also going to teach you how to protect all your assets using land trusts and personal property trusts.
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Hi! It’s Lou, and talking about our Path To Home Ownership clients, the folks that move in, first of all, they joined the membership and then they move into one of our properties. One of the things we do annually is we, and remember this with the rent to own, meaning the silver level or our owner financing, which is the gold level. There’s certain things that we want to know about the property that we are offering to our client. Once they move in, we want to make sure that they’re taking good care of the property. So, we do annual inspections. Now, when do we do that? We do that 90 days before the expiration of their rental agreement. Now, whenever someone is doing a rent to own, that means there’s two agreements that exist. One is the rental agreement, the standard rental agreement, and the other is the option agreement, the option to purchase that property.
So, that client has the option and we give them up to three years to exercise that option. So, we give them plenty of time to consider whether they want to own that property, a different property, you know, what’s going on in their life. For example, when people are working with us, typically they have less than perfect credit. They can’t really qualify for a loan right now today. So, we are setting them up for the opportunity to qualify at a later date. And that means that we’re going to, for example, guide them towards a nonprofit organization that does credit restoration that we offer through our organization. And they say yes or no, or they go someplace else. We don’t require them to use it, but we want to give them a true Path To Home Ownership. And so, in this process, there’s a timeframe while they’re getting their credit improved.
And while they’re collecting up their additional down payment, they’re living in the property. And they’re making those monthly payments that they are getting credit for. And in fact, at our rental own level, we’re even giving them a bonus credit on a monthly basis. Every month that they take, take care of the property and pay their payment, their monthly housing payment on time. Then, they are earning that credit towards their down payment and to help them on The Path To Home Ownership. One of the things that we are looking at is, that they are a Home Owner in Training. So as such, we’re going to come and inspect that property once per year. So, as I was saying, 90 days before their one year rental agreement expires. Now, remember they have a three year option, but they have a one year rental agreement. And the reason for that is, we want to be able to adjust along the way rents do increase.
Why? Well, there’s the normal inflation. We have a thing called inflation. It’s a real thing. According to the Bureau of Labor Statistics, it’s about 2.94% for the past 20 years. So, we know that, our dollar is going to be worth less. That means at the beginning of the year, you have a dollar at the end of the year, you have 97 cents essentially because of a thing called inflation. So, we need to factor that in. And that means that every year we need to be in a position to be able to increase that monthly payment. Why? Because our dollars are worthless. The second thing we look at is, have the insurance costs gone up over that year? The third thing we look at is, property taxes have the property taxes increased over that year? And the fourth thing we look at is, the condition of the property, has have they caused a lot of repairs expenses that were through the fault of their own instead of no fault of their own.
It was through the fault of their own. For example, stuffing up the toilets or doing things to damage the appliances, the walls, the windows, the screens, whatever it might be that would cause additional maintenance items that they need to be responsible for. So, we do that inspection once a year, 90 days before the expiration of their one-year rental agreement. And when we look at, when we go out and look at the property, then we’re looking for certain things. For example, are they keeping the gutters clear of leaves and pond straw and things that clog up the gutters that then cause water to back up to then rot out the facial boards, perhaps even go up under the shingles and rot out the deck boards under the shingles? If the gutters are kept clean, then that’s not going to happen. That gives a free flow of water to come from the roof, down the gutters and out into the yard.
And away from the foundation of the property. That’s one of the things we’re looking for. We’re looking for damages to the property, broken windows, screens, other items that they could have caused to the property. Sighting, is a sighting coming away from the building? Then we’re looking at the inside. Have they changed the filters on their heating and air conditioning system? Have they been taken care of minor maintenance and repairs? Are there drips and leaks under the sinks? So, we’re going to look at a whole myriad things. When we go in and inspect the property. Now, what’s the process? Well, first of all, we notify them in advance that we’re coming and set up an appointment with them. But third, we give them a list of things that we’re going to be looking at. That’s a heads up for them, to know that they need to walk around and look at those things because there’s about to be an inspection.
And there could be things that we’re going to come back to them with to say, Hey, you need to take care of these items. So, sure enough, our inspector, that’s about a week before the inspection. So, we set the appointment, send them the notification, send them the list. Then, when the inspector comes, they inspect the property, make their list, take pictures of a variety of different things. They bring that back to the office or report that back to the office. And then, my office manager looks at those various things. And then, they prepare a letter to go back to the member and we call our residents, members. They are members of The Path To Home Ownership Program. And so then, they receive that back and they know what we’re looking at and things that we are asking them to take care of. Why? Because they’re a homeowner in training and these are the things you can take care of.
Now, number one, you can take care of these yourself, or number two, you can hire someone. For example, we’ve got people that they can hire, to come and take care of those things. And then, they’re righted with us and back on the Path To Home Ownership. So, we are looking for these kinds of items, so we can determine exactly what we’re going to be doing with these folks going forward. If we want to offer them a renewal. And so, we send out at 60 days prior to expiration of the rental agreement, everybody receives a renewal notice. And of course we’ve already had our inspection. So, we know we want to renew with these folks. And then, we go into that 60 day span. Now, in our agreement, they have to give us a 60 day notice, that they are planning not to renew or planning to renew.
And in that notification, we are giving them their rental agreement extension, and offering them the new price point, taking into account those four items that I mentioned before. And then, setting their annual payment and their monthly payment of their annual payment going forward for the next year. And so, they are going to receive that notification. They have to get that back to us within 30 days of the expiration of their agreement, whether they are renewing with us or not. And if they’re not, then now we have plenty of time to begin marketing that property to our list of clients that we have in our Path To Home Ownership Membership. Because, what we do with our clients that are in the membership is we give them first look status. So, they can actually see the property before it goes out to the public. So, many of our properties never make it to the public because we do have people in the membership that are ready, willing, and able to come into a property as soon as we have one available for them.
So, that’s our process leading up to that timeframe, that the resident is either staying or going. Funny note is that sometimes people say they’re going to leave, and then they go out in the marketplace, and they found out that they really got a really good sweet deal with us. And so, they sometimes come back and say, no, we, no mas, no moss, we want to stay. We want to continue with the program versus those that leave. So, we have a very small number of folks that actually decide to leave the program. But if they do, then we’ve got a heads up. We know what we’re looking at in terms of the repairs to the property, we know what we can mark it out to our clients. And we’ve got a process by which we know exactly what’s going on with our properties ongoingly. So, that’s my advice to you is, definitely do inspections on your properties and definitely put your clients, all of them, even renters on The Path To Home Ownership. Yeah! Babe.
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