Posted by JoeKaiser on April 18, 2002 at 22:34:17:
Tax consequences aside, there’s not a whole lot of difference between the two in terms of mechanics - so much per month, for so many years, with an ultimate refinance down the road.
All my owner contracts say “lease” and “option” somewhere in there.
Joe
500K Lease Option - Posted by Joe Scherb
Posted by Joe Scherb on April 17, 2002 at 21:09:20:
A friend of mine surfaced a lead on a home valued at $500 in Pheonix AZ. I haven’t checked it out yet, and don’t have any details but…
Assuming it’s in a conforming area & there’s nothing unusual about the deal, is it posible to find t/b & lease option a home in that price range. rent to cover P&I alone would be $3500 (assuming $7 per thousand).
I live in another part of the country & don’t know the market in pheonix.
Please advise.
J.S.
Re: 500K Lease Option - Posted by Joe Scherb
Posted by Joe Scherb on April 18, 2002 at 20:52:39:
Great responses from the two people I scan this board for!!
JohnBoy: You know it. This reaks of disaster if anything goes south. But I’ve got a little padding…
JoeK: Thanks for your two cents. I’d love to play the spread between the morgage payment and the L/O spread.
A funny thing happens with $500k houses . . . - Posted by JoeKaiser
Posted by JoeKaiser on April 18, 2002 at 24:18:02:
Can you work it backwards? In my area $250k houses rent for $1500 and someone who didn’t know better might assume that a $500k house, being twice as expensive, would rent for $3,000.
Nope . . . probably rents for something like $1,850 or $2,000.
Now, if that same $250k house has a mortage of $200k principal and interest payment of $1200 a month, our $500k house, with a $400k loan at the same interest rate does in fact have double the mortgage payment, or $2,400 a month.
Which means, in my neighborhood anyway, it’s cheaper to buy a $250k than it is to rent it, but it’s cheaper to rent a $500k house than it is to buy it.
Sooooooooooo
If you could get a lease and option on the place at the normal rental rate, you could then turn around and “sell” it at the normal “sale” rate, you’re talking cashflow.
Get a lease and option on it as cheaply as you can and then turn around and sell it on owner financing that has the words “lease and option” somewhere near the top of the page (it’s simply a matter of painting the picture for the “buyer”), and cashflow happens . . . big time, (as Dick Cheney would say).
In other words, in my town, I can rent that thing for $2,000 a month and turn around and sell it at, say . . . what would be equal to maybe 10% interest. Don’t have my calculator with me, but I’m guessing it’s “substantial.” Anyone care to work the numbers?
Joe
Re: 500K Lease Option - Posted by JohnBoy
Posted by JohnBoy on April 17, 2002 at 23:15:18:
The bigger question to be asking is, can YOU afford to shell out $3500+ per month for months at a time while trying to find someone to L/O the property to while it sits empty inbetween tenants???
Re: A funny thing happens with $500k houses . . . - Posted by terranceh
Posted by terranceh on April 18, 2002 at 21:02:01:
Joe,
So you are saying to acquire a house with a L/O at