Lease/Option my OWN house? - Posted by Scott (Dallas)

Real Estate Investing
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Posted by Raven on December 11, 2002 at 01:18:57:

Hello,

I have taken a course on lease options, but an still a newbie, so take this advice with a grain of salt. The bottom line is to maximize your profits and cashflow. You can mark up the monthly payments a couple hundred dollars higher than your PITI, and if they say its too much, mention that one hundred of it would be applied toward the purchase price or down payment on the house. This way you get more cashflow up front. Another thing is to maybe suggest that property appreciation is about X% each year in that area, so sell the house for a lil less than what its future value would be. Make them feel like they are getting a deal, but maximize your profits anyway you can.

Just my two cents.

Raven

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Lease/Option my OWN house? - Posted by Scott (Dallas)

Posted by Scott (Dallas) on December 10, 2002 at 18:22:19:

Hello,

Having been a frequent visitor to this board, I always find a lot of valuable info. I’ve held an investment property in the past, so I do consider my knowledge level to be better than average. I also own several courses including Bill Bronchick’s Step By Step Lease Options.

Here’s the deal - I currently own my home, lived here for 4 years but due to other issues I am considering selling.
I had a realtor check the comps and they are selling in the 140-150k range. The remaining balance on my note is approx 106k. It is an FHA qualifying assumable 30 year mortgage at 7.5%.

I realize if I list it with the realtor I will automatically lose about 8% of my profit. I don’t want to do that, especially since I have what I’d consider a pretty fair amount of knowledge on lease-options. So, I wanted to possibly sell the property that way.

One problem is - none of the info I’ve found deals with the lease-option from an OWNER perspective, only from an investor standpoint. I’d like to know how to possibly structure this to maximize my return and cash flow. Would selling this property another way make more sense?

Any ideas, and/or advice would be much appreciated. Again, thanks for providing such a great resource.

Scott (Dallas)

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Re: Lease/Option my OWN house? - Posted by Ronald * Starr (in No CA)

Posted by Ronald * Starr (in No CA) on December 11, 2002 at 14:11:59:

Scott–(TX)----------------

Well, you will do what you think is best. The lure of the lease/option is more money, easy to sell. In reality, probably best for you is a straight sale, without a real estate broker.

I have sold many properties and I am not not much of a salesperson type. You don’t need a broker, depending upon your real estate market–if it is hot, you can sell yourself. If it is slow, you may or may not be able to sell yourself. Given the amount of work it takes to do a sale, you will be paid handsomly for your time, probably.

If you can sell it yourself after studying up on the topic and spending about 3 months, you might consider listing it in the MLS. My suggestion is that at that time you list with a discount broker, who will charge you about $300-$500 and you will pay the broker whose office brings in the buyer something like 3%.

At the price and expenses you’ve got, you might consider just a straight rental program, holding the property for the long term. That would be dependent upon your other plans-going to stay in the area, etc.

To me it does not make sense to mess around with a lease/option unless you have to do so. Here, you have a couple of other options, which I feel are better.

Good Investing*******Ron Starr***********

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Not for the faint hearted. . . - Posted by DaveD (WI)

Posted by DaveD (WI) on December 11, 2002 at 09:32:26:

I’ve done what you are asking. Not that I wanted to. We bought the mother of all rehabs for our dream house. We knew it would take at least six months to gut and build-out to make it livable, and budgeted accordingly, knowing we would be making double payments. (Not habitable, we lived/worked all day at the new house, slept at the old one. Mostly, we wrote checks).

We weren’t worried about selling our old one since it was in perfect shape, and we had our thumbprints all over it for the last 15 years. It was great. Four months into the project we retained a realtor to sell it. We knew it would sell quickly.

It didn’t.

We were out of time and money. This is when my wife growled “You better do some of that creative sh*t real soon, or we are going down!” We were serious don’t wanters.

Withdrew the listing, ran an ad in the paper, quickly LO’d for 6,500 down. Nice family, self-employed. Five months later moved out. Re-leased to someone else for 6,500 down. Didn’t qualify them. Didn’t want to know! Stupid. Finally found out they were a 476. Hung in there three months past their expiration date, finally got them closed.

We had to take back a 17,000 purchase money second for it to happen, along with lending a few thou unsecured for them to crack the nut. Basically, it is a free second, because had we sold for cash we couldn’t have gotten as much for the house, in addition to realtor costs. When you sell by LO, you get a premium price on a rare commodity from someone who cannot buy any other way.

Bottom line: A roller coaster learning experiance, an extra up-front, a three year 11% second in my favor at 30 year amortization, and although he has always been on time with me, the guys credit still sucks after 2.5 years paying on it. Go figure. Still not out of the woods yet. We come out a healthy five figures ahead. My wife is still mad.

Motivated sellers will do anything to get rid of their problem. It’s also nice to get paid for screwing up. I’m glad I understood how to work both sides.

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Re: Lease/Option my OWN house? - Posted by David

Posted by David on December 10, 2002 at 18:52:56:

Sure why not? Whats the diff. You get the same profits as an owner you would create as an investor. So why sell it outright? Let the sale PAY you.
You didnt mention if the PITI is in the range of local market rents. If it is great! If its higher you sell the OPPORTUNITY to your first-time buyer. If its lower you make a better PCF. Who doesnt like that?
Just consider all the things you would want to get if you were an investor and approaching YOURSELF. Then pay them back to YOU.
How do you plan to qualify and motivate your tenants?
David
(803) 642-7813

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Re: Lease/Option my OWN house? - Posted by Scott (Dallas)

Posted by Scott (Dallas) on December 10, 2002 at 21:53:17:

David thanks for the response. my PITI is right in the range of local rents, around 1200/mo. Although the rental market is a little saturated. I’m not sure about qualifying/motivating the tenants yet. I need to study my L/O course more. You make a great point though - since I’M the investor AND the owner I should be able to profit even more. Have you done something similar?