Investors, renters matched in lease-to-own program

When Greg Hughes looks at the inventory of homes for sale in the Reno-Sparks area about 1,000 bank-owned properties, another 2,500 involved in short-sales he sees a market filled with opportunity.

Each of those distressed properties, Hughes figures, has been home to a family that's interested in owning a house.

And given a couple of years to clean up their credit rating after the loss of their home during the downturn, many of those former homeowners will be buying once again.

The opportunity, Hughes says, is this: Pair up real estate investors looking for better returns than the pittance they can get on bank savings with families to create lease-to-own deals on houses in Reno and Sparks.

"We have this gigantic market of people who are forced to rent," he says.

It's taken a year for Hughes Private Capital to get its MyHomeNV.com division up to speed, but the company has completed three lease-to-own deals, has three more in the pipeline and is beginning to build momentum, says Hughes.

The firm has run about 45 real estate agents in the area through a half-day training session that prepares them to work with lease-to-own clients.

Realtors who represent the sellers in the sale of homes to the lease program earn a referral fee from Hughes Private Capital.

The lease-to-own program looks for houses in the $100,000 to $200,000 range.

Lease payments for consumers in the program are set at 1 percent of the purchase price. They generally need to put up $8,000 to $12,000 in cash to cover the first month's rent, security deposit, escrow fees, inspections and the fee collected by Hughes Private Capital make sure the deal is put together properly and legally.

Twenty percent of the consumer's monthly payment is set aside as a credit toward a potential purchase of the property.

The program's pitch to investors: Potential returns of 12 percent a year on cash investments and potential returns up to 30 percent if the investor can borrow money to leverage his own cash in the deal.

Investments, Hughes says, are secured by real estate with well-vetted tenants who are committed to making the transition from renter to owner within five years.

Initially, MyHomeNV.com is putting deals together one at a time one house, one family, one investor.

Ultimately, Hughes says, the company hopes to build volume through the creation of pools of investment dollars that can finance multiple lease-to-own residential transactions maybe dozens or even hundreds at a time.

A lease-to-own program marketed by Dickson Realty in northern Nevada earlier this year was successful, says Nancy Fennell, president and chief executive officer of the real estate company.

But the program dubbed "Fresh Start" ended its operations in northern Nevada when The Grupe Companies of Stockton, the program's parent, tapped a California pension fund for capital. The pension fund required that only California properties could qualify for "Fresh Start."

"I still get calls on lease-to-own on a regular basis," says Fennell.

While Hughes Private Capital got into the lease-to-own program to turn a profit, Hughes says the work to get people back into houses also is important to the restoration of financial confidence among northern Nevada residents.

"This brings hope to people," he says. "If you don't have hope, you don't have anything."