Found a Lease/Opt... Need advice - Posted by Kris

Posted by Matt B on July 05, 2001 at 08:27:36:

I suggest that you read through former posts on this board, read through the articles, and search through tha archives for advertising ideas. There are TONS of ideas on this site. Here’s a recent post I made as well-

Found a Lease/Opt… Need advice - Posted by Kris

Posted by Kris on July 04, 2001 at 24:46:10:

Ok heres the situation.

I found this one yesterday. Its a 3bdm/2 bath. 1400 sqft 1acre lot. Asking price: 105k on a 2 yr lease option with 1100-1200/mo pmts, or 110k if you want to do a faster close. The owner is an investor and likes doing lease/options to because they are faster to sell than conventional purchases, least thats what he said. Well thats the price. 105k w/ lease opt. I want to sublease this or flip it. What do I do next?

Any expert help is much appreciated.

Re: Found a Lease/Opt… Need advice - Posted by Matt B

Posted by Matt B on July 04, 2001 at 07:37:51:

What would the house appraise for? Can you actually collect more than $1,200 for a rental payment on this house?

I would think that this is not a good deal for you. If it is being set up by another investor, they have probably priced it to squeeze every last penny out of it. It would most likely be difficult to impossible to get a sub tenant/buyer to pay you more. On top of that, this investor’s contract will probably not allow you to sublease or assign it.

In order to find good deals that you can actually make a profit on, you can’t simply go to other investors and try to take a lease option that they are selling. You can be sure that they have priced as high as they can, with high monthly payments. You are not going to be able to collect more from someone else.

You need to do your own advertising to get calls from motivated sellers where YOU can actually structure the deal. Don’t allow someone else to structure the deal because you probably won’t be getting a good deal. On this particular deal, unless the house will appraise for $140,000 or higher and you can collect $1,400 or higher, I’d walk away from it.

Re: Found a Lease/Opt… Need advice - Posted by Kris

Posted by Kris on July 04, 2001 at 13:56:55:

But, when we are structuring a 2 yr lease option, aren’t we structuring it with the properties future value in mind and not its current value? That being the case, after 2 yrs, and in that area, wouldn’t it be worth 115 or 120k?

Re: Found a Lease/Opt… Need advice - Posted by Matt B

Posted by Matt B on July 04, 2001 at 15:45:28:

If you’d like to speculate about the future value of a piece of property, why not do something less risky than real estate like investing in the stock market? That was not meant to be insulting at all, I simply want you to realize what you’re getting into.

When you BUY on a lease, you must get it less than the CURRENT appraised value. Now, you can still squeeze a deal out of something with very little equity, but DO NOT touch an overpriced or overencumbered piece of property!

The point of my original post was that an investor is already going to squeeze the profit out of a deal. Trying to take a lease option from an investor, then pump up the payments and purchase price so far beyond market is ridiculous! Just because you “think” that the property “may” appreciate, does not justify getting yourself tangled up in a crappy deal.

Now, when you have acquired the property correctly (meaning not from another investor and with a good price and payment) THEN you can price it slightly above market. However, this is what the other investor has already done. There’s no way for you to make a profit here. Can you bank on this property being worth substantially more in 2 years? Will it be worth enough for you to justify the risk of taking on over-inflated payments and purchase price, deal with having to maintain and repair the property, etc??? If so, where do you live? I’m moving there tomorrow!

The bottom line, as I stated before, is to do your own marketing to get truly MOTIVATED sellers calling YOU with deals. That way, you can actually find a REAL deal worth pursuing. If you need any further help or clarification, feel free to ask. None of this post was meant to be mean or insulting, I am just trying to help you avoid making a big mistake as you try to get started. Good luck.

Re: Found a Lease/Opt… Need advice - Posted by Kris

Posted by Kris on July 04, 2001 at 21:55:55:

Ok, you’ve convinced me. So what do I do regarding advertisment. I live in So. Cal btw. What type of advertisment you suggest that I can use to put in the classifieds?