Land Contract or Lease Option (wrap)? NEED ADVICE - Posted by Chris Raber
Posted by Chris Raber on January 23, 2002 at 15:56:07:
I HELP IN CHOOSING WHICH DEAL YOU THINK I OUGHT TO CHOOSE… Ya see, i am buying a house for cash at $30k. I close in two weeks. The home is worth $42-45k.
i would like to resell (flip) immediately, however in Upstate New York, it appears that most banks want seasoning…1 year. (Seasoning hurts here because a buyer cannot get a loan because I haven’t owned the house for more than 1 year).
So, i have two options here the way i see it (assuming the house sells after ONE YEAR for cost comparisons below)…
i refinance the house (get 80% LTV 45k) and take $36k mortage AND I 1)sell on L/C or, 2)I L/O the property.
OPTION ONE means (assume i sell for $42k): i get $4200 down, the difference in my PI and the buyer PI (assuming L/C at $37,800 @11% (“x” yrs)), which is apprx $150/mo (for 1 year = $1716), zero on the refi (due to closing costs, and the net sum when buyer refi’s (conventional) and i get the rest of my equity (Approx $6300. ALL = 4200+1716+0+6300=$12,216 profit!!
OPTION 2 means (assume i option/sell for $42k): i get $1500 down on L/O, the difference in my PI and the buyer PI (assuming i L/O for $700/mo)274/mo (for 0ne year = 3288/yr),$2500(from the refi)(80LTV)36k out minus misc. costs + cash outlay ($31,500) minus closing costs on the refi ($2k, and exercise of option (40,500 owed by buyer (42k -1500 down)- my 36k refi loan (3500) = ALL = $1500+ 3288+ 2500+3500 = 10,788!!!
Am i missing something here, or is the L/O a better solution here