The main strategy Capable Home Buyers tries to implement is to purchase a property, perform any required rehab works, large or small, and offer the property back out via Owner Financing to a retail buyer.
Capable Home Buyers then packages these properties together into a portfolio and obtains a mortgage from a competitive lender for a term typically between 15 – 30 years.
Private lenders are used to help with the initial stages of each project – the purchase and the rehab. We prefer to keep the private lender in place until we create the portfolio loan and refinance the private lender out, however many private lenders prefer to be in and out in a quicker time period, and that’s ok. We can work with that also.
So how does Capable Home Buyers make money when using all these different lenders and third parties.
Most real estate investors know the money is made in the buy and the money is realized in the sell and our strategy is no different.
Originally the strategy was to buy long term rentals and hold them to create an ongoing income through rental income. The problem is, the margin for the investor is not high enough to actually make a profit from a rental property if the house is leveraged (has a mortgage).
We learned very quickly that maintenance will kill an investment. The purchase and the rehab is ok, they are predictable costs. You know the taxes and insurance and you know what your mortgage amount will be. However, that is not all the costs. There is vacancy, maintenance and tenant changeover costs to factor in and these are not fixed costs, they vary all the time. And if you’re a landlord you know exactly what I’m talking about.
My dream was to be a landlord of many properties and sit on the beach and collect my rents. What it became was a nightmare and there was no beach to be found. I found myself reinvesting all the accumulated rents back into each property by way of Painting, Flooring, HVAC, Replacing broken windows, weeks between tenants, real estate agent commissions, mortgage payments during vacancies, etc.
I don’t want to be a landlord, I want to be the bank. How often have you contacted your bank to advise them the AC unit failed and needs to be replaced. You only contacted them when you wanted more money, not to get them to do the work, at their expense. The bank makes all the money and us landlords do all the work and take on all the stress.
Owner financing is a way for us as investors to act as the bank. And if you offer competitive rates, you can compete with the banks. We don’t have bad tenant/buyers. They are all great and most would qualify for traditional loans from a bank but they love the house and the product we offer. Plus we offer personalized service that the banks wouldn’t know how to offer.
Some of our tenant/buyers have become great friends and we even have BBQ’s together. It is a great relationship and best of all it is win/win. If you are a private lender and are looking to invest in a quality investment vehicle, Capable Home Buyers can help you be part of the win/win/win scenario. You will get a great return, paid by quality buyers, managed by professionals and secured by real estate.