Posted by Steveonne on March 05, 2002 at 13:38:30:
I’d like you to remember, there are no stupid questions, only stupid answers. Keep asking and you should get a better response than that last one. Gee!
LEASE OPTION IDEAS - Posted by DLC
Posted by DLC on March 04, 2002 at 18:50:12:
Ran across some people wanting to move back to Nebraska (Why?) from a mountain town in Colorado. They want to bail and I need a place to live since I am moving to the area. They?ve had the house on the market for 9 months and can?t get in sold. They are desperate to leave. They are a young couple with small children, so I?m sure they need their equity.
They will lease / option the house to me for $750 Mo. It has been on the market for $155,000, so the multiplier is there (for me anyway). It appears to be worth it and RE values are increasing in the area.
I?m thinking lease / option for two years. If the value?s improved enough to make it worthwhile, I?ll execute on the option. If not, I?ll walk. However, I’ll probably want to build a log home within the next two years.
There’s a way to make a buck here. Some of you guru?s give me some ideas.
Re: LEASE OPTION IDEAS - Posted by Mitchell
Posted by Mitchell on March 06, 2002 at 24:02:27:
DLC:
Your rent is too low. PI for $150,000. is $1,000 per month at 7% for 30 years and that does not count taxes and insurance, probably another $400 per month, equaling $1,400. per month to break even. Therefore, their offer of $750. per month means that they are willing to lose $650. per month on rent OR they have a very low mortgage payment. If $400. is TI, then $300. in their principle and interest, which, at 7%, 30 years means that they owe only $45,000. You can check by going to the county clerks office and checking how much they paid in mortgage taxes to determine their original mortgage.
Armed with this information, and if I am accurate, then they have a great deal of equity to play with. Your creative negotiating skills will now come into play. Look up the house in MLS, talk to the agent and find out if they had any offers that they turned down. That will give you their approximate bottem line. Tender a lowball offer to test the waters. If they do not respond, you can always up your offer. But, be sure to engage them in conversation. Get them talking and they will reveal how they can be sold.
As a bank president, you will know some real estate investors. Ask them to help you.
Good luck,
Mitchell
Re: LEASE OPTION IDEAS - Posted by Matt_MPD
Posted by Matt_MPD on March 04, 2002 at 22:54:31:
DLC,
A couple of things come to mind when you ask about there being a way to make a buck on this deal. First though, I’d like to ask a few things:
In this l/o does the seller not stipulate a higher value for next year if you don’t excercise in the first 12 months?
Does your option payment (up front) get carried over into the subsequent years or are you going to lose it?
How much are you putting up for the option and how much is being applied as a credit monthly toward the purchase price?
Is the option purchase price what the home is valued at today or will be valued at the end of the lease term?
Now, as far as how can you make a few bucks…
If you have an assignable option, where you can as the t/b assign your option to a subsequent t/b, you could sell that option for a small price. (If I were the seller I wouldn’t allow it unless this were an absolute extreme case.)
Could you take this property subject to the existing mortgage and give the seller a note for their equity?
Obviously I haven’t had a very long time to contemplate the idea fully but I’m sure there are ways of making some money on the transaction however I would think that the seller would have to be VERY motivated to allow most if not all of them.
I’m not sure I’m much help in this but I hope you get some ideas.
Matt Yohnk
MPD Investments Inc.
myohnk@mpd-investments.com
Re: LEASE OPTION IDEAS - Posted by Joe M.
Posted by Joe M. on March 04, 2002 at 19:43:24:
LOOKS GOOD…so far. Need more details.
Re: LEASE OPTION IDEAS - Posted by DLC
Posted by DLC on March 04, 2002 at 23:39:02:
Here’s what I’m thinking.
They are offering to lease it to me for $750 per month. I will offer them $800 per month, with $300 Mo going to the purchase at the end of 2 years. Purchase option would be $150,000. You figure they have been asking $155,000 and haven’t sold it in 9 months. If they were to get their $155,000, they pay 6% sales commission and closing costs, so all said and done, they net about the same $$'s. Only, they wouldn’t realize the two years worth of appreciation. It appears this is running at least 5% per annum.
This gets the house out of their hair, but I’m wondering if I need to throw some cash at them to get out of town on, say $2,500-$3,000. This is what I’m pondering. Maybe ½ going towards the purchase or all or ½ toward rent if I decide to walk. I have excellent credit and income so I’m not worried about a loan. I’m a bank President so I can get a bridge loan to exercise the option, then get a refi.
I need to establish the current fair market value. This just came about today, so I still have homework to do yet.
This may be a little one sided in my favor, but it gets them off to Nebraska and me a place to live as well as an RE investment. All they can do is say no, or make a counter offer.
DC
Re: LEASE OPTION IDEAS - Posted by Joe M
Posted by Joe M on March 04, 2002 at 20:00:47:
If you need to ask that, then I’d spend at least the next few months educating yourself before you try to do anything.
Re: LEASE OPTION IDEAS - Posted by DC
Posted by DC on March 04, 2002 at 20:17:16:
I didn’t realize we were talking rocket science here.
Re: LEASE OPTION IDEAS - Posted by Joe M.
Posted by Joe M. on March 04, 2002 at 20:44:06:
WOW! You know nothing about Rocket Science yet you think you can learn it enough to build a rocket it a FEW MONTHS. Geez you are smart.