I have the potential for my first real estate deal with a very motivated seller but I am uncertain how to structure it.
I have a friend who has been offering his home in a lease option to me on two occasions in the past 2 years.
The home is in an upscale area, with homes ranging from 350 to 700k. His home is listed on zillo at about 400k.
He is out of state and resides in it about 3 to 4 months of the year.
I studied and produced a lease option purchase 2 years ago and got cold feet.
I have studied Lease 2 Purchase Handbook by Beaubien.
The home is 10 years old, could use a fresh coat of paint, and needs a few repairs, the most notable being water damage on an outer wall over the pool which is not attached to inner walls. Calking around window sills is also necc. Otherwise, the interior of the home is totally updated for today’s market; granite, tile, appliances, jacuzzi tube, etc.
My goal is to rent it for 2 years for myself prior to excersizing my option and find a buyer.
I do not desire a 3600 Sq ft home at this stage of my life but my goal is to sell it for whatever profit can be earned in 2 years and purchase myself a small condo for cash
In the past 2 years the home has appreciated about 150k, according to zillo
Of course I need more firmer numbers on the home
MY BIG QUESTION
Understanding that he is truly motivated, is willing to rent it prior to purchase, and wants a “win-win” for both of us, do i:
Do I offer less than todays value to purchase the home in 2 years, with appreciation per year? I am going to cover the maintenance that falls under 500$, maybe $1000.
Should I offer more than the current value, plus appreciation, expecting that my profit will come in 2 years of appreciation?
Or something else that I have not considered?
I do not have to pay for the option because he desires to do business with someone he is familiar with. I also am not asking for a rent credit because he is going to rent it well below market value
I welcome all thoughts