Saturday 3/6/2021
Good Neighbor Association: Scott & Isaac Financial Q’s
-Minimum requirements?
-Three times income to “rent”. Three month emergency savings (rent+utilities+avg food & gas)?
-Credit score 600+, or references and discussion explaining why it is low, and what the plan is to correct.
-Stop punishing felons.
-Instead of a security deposit, allow tenants to buy furniture and finishing touches to make the place feel like home, as well as create an initial deposit in trust towards me. Maybe allow tenants to pay for minor CapX projects (fence, flooring upgrade, etc), and treat it as a down payment directly towards their equity stake (need to cap this if it exceeds the equity gap between my loan to bank and their staked equity.
-Lease is mostly for banks to be happy, and as a safety net for troublemakers who make it past the screening process, which needs to be in depth and uniquely built to go after a more niche Good Neighbor minded person(s). This is one of the parts that also plays into the trust building process. “I’m not going to micro-manage and be picky about everything in the lease, but if things get out of hand, we have some goals we can work together to accomplish before I need to pursue efforts to find a better housing solution for the current tenant.”
-Transparent “rent” structure: 20-30 yr amortized payments based on appraised market value (my rate vs FHA/ Conventional? Cosign for better rates? PMI needs to be factored), taxes & insurance (don’t forget renters insurance, and increased yearly taxes), management fee (done by GNA/ majority stake holder, until tenant gets to 20% equity, then offered as savings tool if tenant can do all the work required for financial management/ taxes, as well as proven history of good property stewardship), prepaid R&M and CapX savings (mix of easy to access checking and saving, plus excess stored in interest earning investment funds, explore options of insurance cost reductions as balance reaches property replacement value, liability only?). Majority stakeholder has the final say, but the tenant is trusted to be on sight eyes for problems or ideas for improvement.
-Need formula and tracker for splitting interest based on current equity split, or for property sale scenario. Best tax setup? Cash out R&M after FHA qualified, only interest equal to equity %, subtract refi closing costs (at least no realtor) Also gives potential for new appraisal to factor into new market value equity (also split based on equity percent). Only Interest from CapX. Best deal is to stay a lifetime partner. If CapX gets too big, maybe invest in neighboring properties.
-Create partner structure for projects around the neighborhood, including property purchase and renovation. Use the skill tree to determine fair labor wages. Can choose to split wages into a mix of cash now & ownership stake investment. When complete, calculate all involved % stake to see control order (every %=1 vote). Having a collective sweat equity pool makes post reno refinancing more flexible. Goal is to get at least 20% down. Also remember some may start as a 10 year help the elderly plan. So one person could get there . Long play increases the chance of owner carry, all the middleman costs that get skipped allow for both lower investment $ needed, and higher cash return for sellers avoiding realtor and time/effort needed to sell. Lets elderly stay home longer (cheaper and safer then some “group homes”. Need to determine fair interest trade through property value appreciation ( might be cheaper than HELOC, but not intended to make payments, seems fair cost of potentially long term contractor debt).
-All so complex, even before discussing crowdfunding the banks out of the process, that highlights the need for BlockChain and smart contracts.
-Every house gets a Houstory profile that records the life of the house overtime. All the renovation and stewardship, accounting summaries, to-do/ wish lists with cost estimates/ design process, social media/ journal/resume for the Houstorians (really create a full story of the house, meant to see if it can survive 300 years).
Investors can put money into any stage of the process (acquisition & renovation, HELOC functions, or long term mortgage).
-Any $ amount gives similar advantage of Robin Hood
-Add unique long term investment fund that is index funded by mortgage installments seasoning (raises floor, and truly invests in local community, technically less speculative). Best tax setup? Specifically income tax bracket reduction option. Basically introducing friends with money to friends with entrepreneurial drive, removing as many pointless middle ment, to increase win-win advantages for everyone actually involved. True shop/ hire local effort. Plus tons of community support avenues to expand on. New education options to learn by doing, have education immediately pay you back. Leverage any write offs, education vs investment vs work (including benefits like health, 401k, etc).
-Wrap everything into a blockchain ledger run by smart contracts.