I completed my first deal! - Posted by Kasi_NYC

import · January 13, 2004, 10:00am

Posted by Brent_IL on January 13, 2004 at 13:48:35:

Most option contracts are written so that you have the right to buy for the strike price at any time during the option period. After the term of the option has expired, you’re out of luck.

Lots of stuff on lease/options in the Articles and the archives.

import · January 13, 2004, 10:00am

I completed my first deal! - Posted by Kasi_NYC

Posted by Kasi_NYC on January 13, 2004 at 11:00:49:

Thanks to everyone on this board that helped me out and gave me advice.

I secured a 3BR/2BA co-op in Flushing, Queens on a great lease option deal. $0 down, no credit or income check. The landlord gave me the apartment on a two-year lease with option to buy at $185k (way below market value), paying $1100 per month rent (downside is that none of that $1100 is going toward purchase price). I was planning on living here for at least one year then possibly selling to someone else.

I was wondering, is there a way I can sell the lease option, or do i have to purchase the property in full before I can flip? Is there any way to flip the property without having to close with the landlord first?

Thanks again for everyone who helped and encouraged me to get into this biz.

-Kas

import · January 14, 2004, 3:18am

A few words about Coops - Posted by Frank Chin

Posted by Frank Chin on January 14, 2004 at 04:18:30:

Kas:

You have to be extremely careful about coops. You’re not buying Real Estate, but instead, shares of a Corporation, where you have to live by its rules, often more rigid than Condos, and affected greatly by the finances of the Coop more than you think.

I found Coops hard to value, because Coop carrying charges vary widely due to the wide variation of the underlying mortgage of the building. That mortgage may range from none for some older buildings, in which case the coop value will be closer than that of a condo, to much lower in value to condos because the Coop itself borrowed heavily to finance improvements. So sometimes, a bargain may not be so after a review of the building’s finances.

So the question is, how does the carrying charges for this building compare to others?

What’s the procedure for the Coop board approving new buyers?

As to flipping it, some coop’s impose a “flip tax”, not only to help with financing its carrying charges, but encourage long term occupancy rather then speculation. So, is there a “flip tax” at this coop??

Answers to these questions will determine if the price is a bargain or not.

And then there are the rare cases where the coop itself is financially struggling because many of the other owners are behind in paying carrying charges. This has resulted in the bank foreclosing on the underlying mortgage. At that point, the coop shares are worth nothing.

I in fact lived in a condo once, where the finances were stressed because many owners refused to pay higher maintenance fees, and we were on the verge of having the electric, water shut off because those bills were months behind.

Frank Chin

import · January 13, 2004, 1:26pm

Re: I completed my first deal! - Posted by Ernesto NYC

Posted by Ernesto NYC on January 13, 2004 at 14:26:11:

Congratulations!!!

I have a question, what are the rules for sub-leasing at this Co-Op?

import · January 13, 2004, 10:18am

Re: I completed my first deal! - Posted by Marcos

Posted by Marcos on January 13, 2004 at 11:18:02:

Congratulations.

Yes, you can do many things now that you have the option.

You can go ahead and move in. Spruce it up, then put it up for sale. You don’t have to wait the 2 years. You can sell it today. You’ll end up doing a double-closing.
You can do a sandwich lease. Rent it to another tenant. For a higher rent, a downpayment and a higher purchase price.
You can sell the lease option to another investor. For instance you have a great deal, where you have tied up $40k of equity in the place, plus a lower than market rent. Maybe you sell your position to another investor for $5k. They pay you $5k, and take over your contract, and do whatever they want with it.
You can move in, live there for as long as you want, and still do any of the above.

HTH, and again congrats.

Marcos

import · January 13, 2004, 12:41pm

Well, maybe … - Posted by Redline

Posted by Redline on January 13, 2004 at 13:41:47:

Can he sublet this apt and make a nice spread (your item #2)?

That’s going to depend on how his lease reads. If the paperwork came from his landlord you can bet it has language to the contrary.

RL

import · January 13, 2004, 11:26am

Re: I completed my first deal! - Posted by Kasi_NYC

Posted by Kasi_NYC on January 13, 2004 at 12:26:10:

Thanks for your reply.

I was wondering how to execute some of the types of deals mentioned. For instance, how can I actually start marketing and considering offers on the property if I don’t actually have full ownership of the property? I would be interested in selling the property but i’m confused on how that actually works since again, I don’t have full ownership of the property at this point. What I haven now is a great lease with an option to buy at the end of two years.

If you have a chance, please explain to me how this sort of thing works. I really, really appreciate it. Thank you again.

-Kas

import · January 13, 2004, 10:56am

selling L/O contract - Posted by mattc - mi

Posted by mattc - mi on January 13, 2004 at 11:56:31:

Marcos - nice to see you posting…

Have you sold L/O contracts like this? Do you get both the new buyer, and original person (seller) that did the L/O to you to sign off saying you have no more to do with the deal - and no future liability?

How has that worked? What if the seller balks?

I say because I’ve seen a couple of possibilities like this - but don’t want to be in the middle of a sandwich L/O myself right now.

TIA,

matt