"Each home has a history, and a story waiting to be told. We breathe new life into these homes to encourage the next story to unfold."
Michael Meuret, Founder
"Each home has a history, and a story waiting to be told. We breathe new life into these homes to encourage the next story to unfold."
Michael Meuret, Founder
Creativity in Real Estate Development
Published on March 30, 2015
Recently, I was offered a product by a development group, that, while intrigued, I was somewhat skeptical of. Developing products in the Real Estate space, and finding your niche as an investor can lead to significant profits. Yet out and out creativity, coupled with risk is usually put on the back burner for safer, more traditional development. Taking risks can often lead to some of the greatest results, and at the same time benefit communities and interest a population of potential home owners that are staying in the shadows.
The product and thought is straight forward. The group has a significant number of homes clustered in an area traditionally geared toward lower income rentals. The homes are solid two and three bedroom homes, purchased low, made rent-ready with minimal investment and rented to a steady flow of renters.
The group’s idea was to take these solid homes and create a home ownership product through putting a bigger investment stake into the home, bringing it to retail standard, while maintaining a sales price that was reasonable and that would fit the standard of the area.
To further enhance the program, the developers agreed to allow input from the “qualified” buyer (one that has been vetted through RenuHomes processes), to enable them a personalized stake in the home they would be ultimately purchasing. The thought is the buyers would be more vested in the home, and would work harder toward their end purchasing knowing they had a hand in creating the home. The home would be offered to a Lease Purchase candidate – again following the RenuHomes criterion of funding in 12 months or under.
I was, and am still, impressed by the creativity of the product. It lends itself to the development of an area that is currently out of focus by local entities and even non profits. But I was somewhat skeptical, knowing that curb appeal, and location have a large stake in the success of any Lease Purchase Project that we put together.
What has transpired since the group started marketing the product has been a surprise. The amount of interest has been staggering. Each day, there are 3-7 phone calls and discussions about the product, the possibilities, and the potential for home ownership in a population that, in many respects has been disenfranchised from the American dream of home ownership. While we have yet to do our first placement, and follow it through to closing, I am optimistic of the programs success.
The number of call generated, the interest of the parties, and their starting pre-work that a couple of customers have began has encouraged me. I hope it encourages others as well. Real Estate development can make a difference, and as an organization, we prefer to be in sphere of making a difference rather then just staying with the status quo. Follow this space – I’m sure the stories that emerge from the product will be enlightening – and even heartwarming.
Michael Meuret
President at RenuHomes, LLC
Is This A Good House for Lease Purchase?
Published on January 15, 2015
I believe within the Lease Purchase / Lease Option / Rent-to-Own world, there is a general perception that you can put any house into this type of program and it will sell…or more importantly the investor will find a candidate that will put “option money” down, but will not exercise the option. Many times I’ve been asked to review homes for my program that investors are sure will sell – but are not financeable for a number of reasons. Since our brand stakes its reputation on our percentage rate of fundings (we are now in the high 90{42aa8528c06334c3d0a656e74e470cfa3eec07151945ccbb66fb2ec9a9708fd6} range), many houses are just not viable for our program.
I recently received a request to accept this house into the RenuHomes program and agreed to accept it. Here is how I made my decision.
- Location – location is everything. Where is it written that a bad home in a bad location is perfect for a Lease Purchase? Location in real estate, no matter the exit, is built on Location. This home is located in a quiet suburb of Columbus, Ohio, one noted for decent schools, quiet neighborhoods, and appreciating values. It’s a place people want to be.
- Development – I use the word development as this is a more serious word for wanting to put value into the home, and simultaneously positively impact the neighborhood. This house is been well renovated, comes with new mechanicals, freshly updated, and has a clean basement, garage and front and back yard… things that buyers are looking for – even Lease Purchase Candidates. It will pass an FHA inspection – which is the type of loan 100{42aa8528c06334c3d0a656e74e470cfa3eec07151945ccbb66fb2ec9a9708fd6} of our customers end up getting.
- Pricing – The home has been appraised and is priced at appraised value. True, by putting in a Lease Purchase Program, the developer will maximize their price, while earning rent. This is why a Lease Purchase, completed correctly, is so lucrative: It maximizes earning on a property while minimizing risk. A win-win for all parties.
We love houses like this in our program and are always looking for more. Our goal is to develop relationships with developers such as these across the footprint in which we operate. And our customers appreciate the due diligence we complete with developers to ensure, once they are funded and become home owners, they have a great home in a great area that will become a strong investment in their future.
Michael Meuret
President at RenuHomes, LLC
The Perfect Lease Purchase Candidate
Published on December 26, 2014
At RenuHomes, we have had great success with identifying the right candidates for Lease Purchase transactions, and coaching them to funding. It is a competency we have developed and honed after over 5 years of completing over 100 transactions. While we don’t want to give away the ‘secret sauce’, much of what we do is intuitive in business, but counter intuitive in traditional Lease Purchase transactions.
The first key element is assuming that every transaction is going to fund. Our companies’ stated goal, and all the documentation surrounding the transaction, assumes the transaction will have a positive end, with a win-win solution for all parties involved. If the investor clearly wants the home sold, and the buyer clearly has demonstrated through their actions that they want to purchase, then the overall transaction has a far greater chance for success. This is a broad statement – but our experience has demonstrated this to be a key distinction that we apply to each and every transaction, and verbalize to our clients (investors) and customers (buyers).
The second key element is inherent in any business transaction… Know your customer. We often have heard operators state that they reviewed the customers’ credit history (naturally it is going to be tarnished…if not they wouldn’t necessarily want a Lease Purchase), checked their rental references (important and a must, but this is not the key to determining a successful fund candidate) and required and been paid a down payment …some up to $10,000.
These are all good – and I wouldn’t deter from them, but I would argue that these elements alone are not the best predictors of a successful transaction (or “Project” as we call them). Rather the key question is “What prevents you from purchasing right now?”. Is it recent late payments? Job change? Lack of positive credit? Numerous job switches? There can be any number or combinations of items that an underwriter will account, that keeps them from approving a candidate.
But understanding what prevents the customer from purchasing today, can lead to a program developed to address those issues, and result in a successful transactions. The traditional elements and checks are critical – but this type of project requires much more if the end goal is a sale – and purchase of a home through a Lease Purchase transaction.
Thirdly don’t forget that a successful Lease Purchase, one that closes to the satisfaction of the seller and buyer, has to take numerous elements into consideration – weighing them appropriately to determine success. Some of these elements include:
- Time – first the time of the option (credit repair period).
- Transparency – The issues preventing successful obtaining of a loan need to be transparent and open. Secrecy usually leads to deeper issues.
- Housing Product – Not any old house can be thrown into this type of program and ultimately sold. People do and say a lot of things when looking to put a roof over their head. A ratty house with a host of issues that looks good now may not look so great once things are cleaned up and funding possible.
- Motivation – demonstrating motivation is one of the most difficult tasks we face. A clear formula to show pure motivation and desire to complete the Project is critical.
There is no single set of criterion that can reduce 100{42aa8528c06334c3d0a656e74e470cfa3eec07151945ccbb66fb2ec9a9708fd6} of the risk and completely ensure your Project will have a successful close. However, with both parties entering the transaction with the same intent, key criterion adhered to, the risk of any given Lease Purchase project can be well mitigated. And of course lastly, by contracting a company that understands how to assess and project manage these transactions, a Lease Purchase transaction can provide a well needed bridge that incorporates the goals of all parties involved. Win-win situations are the best case scenario in any business transaction.
Michael Meuret
President at RenuHomes, LLC
When Property Investing Becomes More
Published on December 12, 2014
I enjoy attending closings when I am able, seated around the jovial closing table, watching the buyer sign piles of documents, chatting with an investor totally pleased with him/herself for investing, and, really against his will, enjoying the process and people. I was glad I attended, it validates the job we do, and what can be achieved when an investor truly comes to enjoy what they are doing, and shares the RenuHomes values we believe in, of enabling strong willed people the ability to become homeowners.
Many flippers are about turning a house as quickly as possible. They work on strict budgets (so do we), and take enormous risks with large sums of money to flip a house and make a tidy profit. They rarely meet and have the chance to interact with the buyers, and understand the gravity of what they are doing – creating a new home which will excite and create memories for a home buyer.
Our investors have the chance to interact with their buyers. For 6 months, they are receiving rent, fixing small issues that might arise, making sure, as this investor did, that their buyer is truly excited about their home. This investor went the extra mile, he landscaped the house, even though it wasn’t in the budget. He grew to know his buyers, he cared, he helped fulfill a dream. They joked about this at the closing table, and the joking added to the atmosphere of the closing, made it more personable, more enjoyable. Indeed, with the right buyer, right product, the process does work.
The buyers emerged after 6 months with a strong house that passed multiple inspections. They understand their house, have resources required to ensure maintenance is continued. And, they learned that investors do care, and are willing to ensure they achieve what they tried so hard for so long to do…that of home ownership. Having achieved it herself, the buyer focused on her kids, making sure that they understand the dream as well and know they can achieve it. All she required was a team, a structure and a program to teach her how and what home ownership is all about, the financial responsibilities and the steps required to get there. When real estate investing becomes more….
Michael Meuret
President at RenuHomes, LLC
Tenant Buyers Who Successfully Purchase
Published on December 5, 2014
I originally wrote this post 4 years ago when the business was still new. After 10’s of dozens of transactions, I still find what I first found in the business to be relevant. With fresh photos of successful buyers, here is my original post in it’s entirety.
The most common question I receive from investors is, “What is your ratio of success with ensuring Tenant Buyers actually fund?“. I have a standard answer – we are at 92{42aa8528c06334c3d0a656e74e470cfa3eec07151945ccbb66fb2ec9a9708fd6} so far. But there is more behind the numbers. The rates are high, but they have come with their fair share of frustration from investors and buyer. The few that have failed have been spectacular and are worth noting in that often, even with all the predictive analysis, dealing with the human population always has the possibility of a curve ball.
Our success rate has come with a certain sense of tenacity. Our teams are following clients from before they actually move into the house, until they actually fund. But drama is bound to ensue, after all these are client’s who lack training in keeping and maintaining credit scores worthy of purchasing a home. These drama’s have included:
- Potential Insurance Issues – yes, who would think that a high renters claim would completely throw a buyers ratio out of whack when they went to purchase. But it did. While we don’t know the full circumstances of what happened, the buyer had difficulty obtaining mortgage insurance that was reasonable because of a high renter’s claim. The drama, and subsequent solution, elongated the closing by nearly 45 days. It was resolved – the mortgage broker was tenacious and the buyer truly wanted the home. She managed, with a high deduction, to squeak by. But just barely. And the investor was on pins and needles the whole time.
- Online purchases – again, who would think that excessive online purchases would prevent purchase – or drop scores 60 plus points. Even with case management, the client denied any purchases. The resolution..? Surrender of all credit cards, and physical watching as buyer closed accounts. The buyer paid down her credit cards, and was able to fund.
- Appraisal did not match purchase price – by nearly $20,000! The solution – a detailed accounting and full scope of work that informed the appraiser what was completed to the home, how much it had cost. The appraiser was able to reappraise the home with the new information, and it appraised accordingly.
Many lenders and organizations would let these situations slip, with the end result being a buyer who couldn’t buy. In any lease option program, it’s critical that the team remain watching and working with the buyer, right up to the closing table. Only after all documents are signed can you truly say a buyer has been successful.
Luckily for our buyer pictured, these issues have not been a part of her situation. But she has struggled – and after two delays, is set to close next week.
Michael Meuret
President at RenuHomes, LLC