Lease Opt. $320k? Do tenant-buyers go this big? - Posted by Michael Yancey

Posted by James Strange on August 12, 2003 at 11:29:41:

Then I would stay away for now.

It all comes down to numbers and if the numbers could BK you then don’t do it.

Lease Opt. $320k? Do tenant-buyers go this big? - Posted by Michael Yancey

Posted by Michael Yancey on August 12, 2003 at 10:26:10:

I can get control of several $320-$360k homes in northern colorado via a lease option arrangement, but I’m a little sketchy on trying to sublease-option them. It seems that this price category would be hard to move with the whole “rent to own” approach, especially given how soft this segment seems in general.

Am I just being a chicken, or are they really priced out of the tenant-buyer market? I can’t tell if I’m wimpy or smart for being concerned that I could be taking on a bunch of white elephants.

What are others’ experience with this? Any words of wisdom would be appreciated.

P.S. Everyone on the board has been incredibly helpful to me as an investor in my early stages. Thank you to all.

–Michael
Michael Yancey
michaely@kdmcs.com

Depends on where you are located… - Posted by Tom Pa

Posted by Tom Pa on August 13, 2003 at 22:19:57:

I sold my last home in Chicago on a LO about 8 months ago. I had it listed with a Realtor for $349K first who came up with a few low ball offers that he tried to talk me into but I wouldn’t bite.
I then went on my own and put an ad in the paper. Had about 10 calls. Sold it to the second caller who was relocating from Ohio.
3 year LO
$7K Consideration to be paid at the beginning of each year.(This covers my property taxes+about $500)
$2500/month rent to be raised $100 each year.
$600/month rent credit if paid on time.
$360K sale price which increases $15K each year.
I have a about $300/month postive cash flow on the place.

I will net about $25K when they buy.

This is definitely not a GREAT investor deal but it was GREAT for me to get rid of the thing.

The moral is that there are people that will buy these on a LO but you probably have to be in the right market area. $360K in Chicago area is not uncommon.

Re: Do tenant-buyers go this big? - Posted by firefox

Posted by firefox on August 13, 2003 at 03:30:09:

How about asking for a six-month lease/option with a string of six-month extensions at your sole option? That way you’d never have more than six months worth of liability.

Re: Lease Opt. $320k? Do tenant-buyers go - Posted by James Strange

Posted by James Strange on August 12, 2003 at 10:49:23:

I am always surprised at the number of people who live beyond there means. I have seen a lot of $50,000 SUV’s parked infront of $35,000 dollar houses.

So on one hand I am sure that someone in your area would love to Rent to Own one of these houses. But the question is will they pay on time? If they don’t can you cover when they don’t.

James Strange

Re: Lease Opt. $320k? Do tenant-buyers go - Posted by Michael Yancey

Posted by Michael Yancey on August 12, 2003 at 11:23:04:

No. I can’t eat $8000/month on $1.4 million (all of them), or $1800/month on $300K+ (one of them). Hence my reluctance to get myself hosed in the event I can’t get them leased reliably.

Again, thanks.
–Michael

Re: Lease Opt. $320k? Do tenant-buyers go - Posted by Carol

Posted by Carol on August 13, 2003 at 10:20:25:

How about making the L/O agreement subject to finding a qualified resident. You could even put a time limit on it if the seller wanted. For instance, if you can’t find a qualified resident in 30 days or 60 days, you cancel the contract and give the house back. I got this from Peter Conti and David Finkel in their Protege Program on lease options.