Re: lease options - Posted by Carlos
Posted by Carlos on December 21, 2000 at 18:09:36:
I haven’t done one of these yet, but here’s what I’ve been able to glean from my more advanced Real Estate brothers and sisters…hahahahaha!!!
You’re dealing with the wrong sellers. The key to L/O is MOTIVATED SELLERS. You want to talk to people that have some problem that they need fixing. When you find that seller, YOU make the rules. Shoot for as much of a discount on the sales price as you can get. This will of course depend on how much equity they have. Find out what the going rent is for the property that you are considering. Here’s an example:
Seller just lost his job and needs to sell. He calls your ad… “We buy Houses” or whatever
House is worth 100k FMV.
His mortgage bal is 90K.
His current pmt is $950.00 and
Fair Market Rent is $1,150.00
Your initial approach should be to get him to just deed the property over to you. Then take over the loan “subject to”. If that doesn’t work do the L/O.
With the L/O, buy at 90K with payments of $950.00.
In your contract lease for 1 year with the right to renew for 3 one year intervals. This gives you an out if you don’t want to be bothered with the property after the year. Try to negotiate 2 months before you have to make your 1st pmt. This will give you adequate time to find a tenant/buyer. Once you have a qualified buyer… ie… sombody with decent credit and with the upfront cash you want. On a property worth 100k try to get 5k upfront.
If your seller gets a new mortgage after a year, you will have made $17,400 on a property that you didn’t even own.
$10K = You bought for 90k and sold it for 100k
$2,400 = Monthly cash flow during the year
$5k = The non refundable option consideration
Take no prisoners in 2001.