Lease/Option: Balance @ time of purchase? (Long) - Posted by PatrickMD
Posted by PatrickMD on December 26, 2000 at 23:11:44:
Hi, everyone here at www.creonline. Merry Christmas, Happy Chanukka, and Happy New Year!
I tried to set this up by the book (Sheets’ & LeGrand’s), so please tell me what you think.
I prequalified a seller of the following: Recently built owner-occupied 2 story 3br/2ba with master jacuzzi SFH; 2 car gar; deck; small, fenced corner lot; great neighborhood of similar houses in a small town.
Comps came back with, "estimate is above neighborhood average of $138K. (there are townhouses & duplexes within a mile.) Highest reasonable: $186K; Lowest reasonable: $159K. Three neighboring houses within .17 mi. sold for $149K, $159K,& $175K within 20 mos. of the present date.
The seller needs $5K. for an impact fee for new house. They’ll consider L/O, they just want to be free of the mortgage. The seller liked the idea of being able to get the bank to credit 75 percent of the lease price toward the new house’s mortgage amount.
They have an assumable 1st for $130K @ 7 percent;
a non assumable 2nd for $39K @ 12 percent; totalling $169K.
The monthly payment equals $1,588 ($1,135 plus $453) per month. They have an appraisal for $175K, are asking $174K.
My front door offer: Lease/Option it from them “Subject To” for $5000. plus the mortgage balance at the time of purchase, with the right to sublease it; with 4 1-year options to renew. Agree to make monthly mortgage payments of $1588. Assume maintenance. $10. earnest money; $0 deposit;
My back door plan: Sublease it for at least 3 years on a Lease/Purchase agreement to a tenant/buyer; $9K nonrefundable deposit; $1,688 rent per month; ask what they can afford to put toward the down payment per month, over and above the rent (try for $200.); purchase price 5 percent over the asking price, or $182,500. T/B assumes maintenace.
Analysis: My profit centers: $9K deposit, $100 monthly until the T/B assumes the mortgage or refinances, $10K down and about $3,500 difference between my lease price and the T/B’s price at closing. About $21K total.
Buyer’s incentive: If they only assume the 1st, they’ll save $200 per month over renting. If they refinance only the 1st, they’ll save $282 per month. If they refinance the $169K combined mortgages, they’ll save approximately $564 per month.
This is my first deal. In your expert opinions, is there a low-risk, no-risk deal here? Have I overlooked anything? Thanks in advance, Pat.