Lease Option My Own House-Can You Help? - Posted by Eva

Posted by Tim Fierro (Tacoma, WA) on July 11, 2002 at 13:07:56:

I would look at refinancing that 8-/34% and the 2nd mortgage to something along the lines of 7 or under after you have been there a year. At that time, maybe your credit and income will allow you to refinance at a lower interest rate which would then lower your overall payments also. Double check that prepayment penalty to see if it there is a time limit on it though.

Getting $5k is a wise choice and doable, but to get an extra $200 per month, you need to determine if the rental rates will garner $1500 a month. Your $1300 mortgages and the $200 profit you seek.

When deciding on the purchase price to your T/B’er, come up with an approximate guess of what the house would be worth (or what you want) for the term of the contract.

By refinancing above as I mentioned, this would also save you a couple of hundred on monthly payments. So if rentals are only bringing in $1300 a month, by refinancing down to an $1100 a month payment, you would still get that $200 a month spread.

When you L/O your house, you still retain ownership and get all tax considerations/benefits from it.

Lease Option My Own House-Can You Help? - Posted by Eva

Posted by Eva on July 11, 2002 at 09:47:02:

As a way to get into Real Estate I bought a house for my husband & I to live in. We paid 135K, got a 100% loan (a 1st and a 2nd). No PMI. We needed somewhere to live anyway so we moved in.

My plan: to stay here until end of this year so that I can at least take advantage of the tax benefits, mortgage insurance, closing costs, etc. coupled with some other write-offs I couldnt deduct otherwise.

I then plan to rent it out on a Lease Option. I was reading a “how to get started in real estate” on one of these posts somewhere and the author claimed that one could make some profit this way while holding the property to appreciate. His theory was if the lessee bails, no problem, just get another.

It went something like: get $5000 or so option money. Rent for about $200 above the going rents and voila you’re in business.

Sounds ok I think. I don’t want to stay in this house too long. It’s in California in the desert above L.A. Nice, nice neighborhood, great neighbors (but we’re really city folks). Seems the going rate for this 4/2 is about 140-145k. Either we paid less than or it’s gone up some. Don’t know which as we didn’t see use any comps.

There is a 6 mo. prepayment penalty. The 1st is 8 3/4%; the 2nd 14% interest only. MB said this was due to stated income–something about my $39,000k salary not being enough, plus we didn’t put anything down. Our closing costs were almost 8k.

This is long and windy I know but if anyone can take the time to offer some advice, that would be great.


I would like to know if this sounds like a good plan or if there is something better.

Also, I’m concerned about the house being in a different tax status from one year to the next, that is, from residence to rental. (The lender has no objections to it being rented after 1 year).

Might add my credit is good and I pay all my bills on time, including this $1300 mortgage. The first is $1000 and the 2nd $300.

I next plan to get into multi units again so we can have somewhere to live and have another investment. My husband is very handy and hard working, semi-retired. He has chronic asthma. I myself drive down the hill everyday to my job in Old Town Pasadena.

There, my life story!