A Question - Posted by Sue T

Posted by Earnest on July 22, 2001 at 20:57:34:

Your nervousness is well-placed; you need more information to resolve your fears.

  1. What is the fair market value of the property? Thirty thousand for a four-bedroom sounds awfully low, but I don’t know your area.

  2. How do you believe you can rent it for $750? What are rents in your area, and what is the vacancy rate? The rent figure and the sale price don’t match. If properties such as this can rent for that price, a sale price of 90K or more would be expected. Why the difference?

  3. If he’s behind on taxes, why? What about the property led to his problems. You need to know this because you don’t want to just buy his problems. That is what he is trying to sell, you know. Also, if he’s behind on taxes on what else is he behind? What liens exist? You need to check this out. Any debts on the property MUST be paid prior to or at a sale. You’ll want Title Insurance.

  4. Sounds like you haven’t decided on an exit strategy. Do plan to buy and hold or attempt to sell, say on a Cal-trust or option strategy. Whatever your strategy, you need to develop it, because that’s the only way to evaluate a deal.

  5. You say he’s completed repairs? Make sure; promises mean nothing. What he says he will do may not turn out as you expect. He isn’t going to put more into a property once he has a sale contract.

From your post, I gather your a beginner. If you’re gonna rent, you need to learn about renting. If your gonna try to sell on an option or whatever, you’re gonna have a lot of studying to do. Learning to rent isn’t all that difficult, but learning creative ways of buying and selling takes quite a bit of study. Don’t try these procedures with your eyes closed. Your apprehension tells you that you have a lot of studying to do. Don’t move until you’ve answered your questions and fears. Of course, you’re gonna need a lawyer, but don’t expect that just any lawyer understand lease options or PAC trusts.

A Question - Posted by Sue T

Posted by Sue T on July 21, 2001 at 13:54:30:

I have some questions. There’s a 4 br house, end of row, in a small city. The area is a little downtrodden. I can get it for about 30k and it would rent for 750/mo. or so. I’ve thought about offering it rent to own. I’m just afraid of getting into a bind. I’m not sure what direction the neigborhood is taking and if the value of this home will increase over time. I could probably lease-option it for 40k in 3 yrs. The owner needs cash to get back taxes paid on this and other properties. He bought this for 18k with a home equity loan. He’s totally rehabbing it before sale. I think he would take back a 2nd for the 20% down payment. And if we paid 35k for the property, he could pay the closing costs. I’m not sure if it’s a good thing or if this is the right way to do it. Please give me some feedback. Thanks, Sue T