Posted by pat on August 23, 2003 at 24:15:38:
Sorry, My sysstem was shutting down at the end of my message. Any help here would be greatly apprecieated. I have been interested in creative real estate intvesting for some time now and have followed this web site often but, I am still not sure if there is a true opportunity here. Help!! Thanks.
Lease w/option to buy - Posted by Pat
Posted by Pat on August 22, 2003 at 23:38:34:
Need some advice!! I am currently renting a home for $1300 a month. About avg. or a little lower than market for area. The property has just been reappraised by the town for 164,370 (104,370 house 60,000 land) last appr. in 1992 for $111,367. Tax rate is 1.8532.
The owner has asked if I would interested in buying. The only option open for me at this point is doing a lease op.
I am considering doing the lease op. and then flipping the prop. and selling my op. to buy.
The house is in good shape but dated. It needs: new siding or possibly just painting (alumminum siding,windows replaced through out, refinishing of wood floors, replacing of asbestos floor tiles in down stairs, landscape alterations, paneling replaced by sheetrock, new light fixtures, cabinet refacing, bathroom appl. updates, counter top updates, cracked pavement drive way replaced.
All things that fortunately I am handy enough (or have connections to) get done at very low costs.
I need to know a few things:
How do I sell the Lease w/op. to the owner?
How do I determine how much to offer to give him monthly and how much goes toward purchase?
How long should I lease for? (note: my intentions are to sell my op. to buy in a simutanulous closing after improvements have been made.
Re: Lease w/option to buy - Posted by Kathy
Posted by Kathy on August 23, 2003 at 14:30:29:
Hi Pat:
Tax assessments aren’t a good indication for the “market” value of a home.
You need to find out what the “market values” for homes in your area are going for, i.e. comp’s, etc. Market value meaning what a buyer is “willing” to pay this moment for a house in your area.
You can get this information from recently sold properties in your area, especially the exact same style of house you are renting. I would go out 10 miles around your house for comp’s in your neighboorhood.
You’ll also need to find out what the average market rent prices are for similiar houses in your area.
Once you have these then you can begin to make an assessment on what price you will want to negotiate with your seller to lease option the house for and the monthy rent for.
Question:
How do I sell the Lease w/op. to the owner?
Answer: You will be in a “sandwiched” l/o with the Seller with a contigency clause dependent upon you finding a buyer. Seller- you - Buyer
Question:
How do I determine how much to offer to give him monthly and how much goes toward purchase?
Answer: Your monthly will be determined by how much Seller owes on mortgage, and how much he wants for house. You can “mirror” his mortgage payments if the seller doesn’t have much equity in the house. If he has more into it, you can offer him money on the back end of the deal.
Usually a seller will ask for “option” money down, which is usually about 5% of sales price.
As for how much you should ask for the house, price is negotiable. If seller is asking 400,000 and FMV is 395,000 I would go down.
Question:
How long should I lease for? (note: my intentions are to sell my op. to buy in a simutanulous closing after improvements have been made.
Answer: Give yourself enough room in your l/o to make improvements and find a buyer for the house. Most l/o’s are from 2-3 years. Yours may be shorter.
Make your l/0 with the seller a longer time period than your buyers so your l/0 won’t be called in first.
Hope this helps.
Kathy
Re: Lease w/option to buy - Posted by Kathy
Posted by Kathy on August 23, 2003 at 14:27:00:
Hi Pat:
Tax assessments aren’t a good indication for the “market” value of a home.
You need to find out what the “market values” for homes in your area are going for, i.e. comp’s, etc. Market value meaning what a buyer is “willing” to pay this moment for a house in your area.
You can get this information from recently sold properties in your area, especially the exact same style of house you are renting. I would go out 10 miles around your house for comp’s in your neighboorhood.
You’ll also need to find out what the average market rent prices are for similiar houses in your area.
Once you have these then you can begin to make an assessment on what price you will want to negotiate with your seller to lease option the house for and the monthy rent for.
Question:
How do I sell the Lease w/op. to the owner?
Answer: You will be in a “sandwiched” l/o with the Seller with a contigency clause dependent upon you finding a buyer. Seller- you - Buyer
Question:
How do I determine how much to offer to give him monthly and how much goes toward purchase?
Answer: Your monthly will be determined by how much Seller owes on mortgage, and how much he wants for house. You can “mirror” his mortgage payments if the seller doesn’t have much equity in the house. If he has more into it, you can offer him money on the back end of the deal.
Usually a seller will ask for “option” money down, which is usually about 5% of sales price.
As for how much you should ask for the house, price is negotiable. If seller is asking 400,000 and FMV is 395,000 I would go down.
Question:
How long should I lease for? (note: my intentions are to sell my op. to buy in a simutanulous closing after improvements have been made.
Answer: Give yourself enough room in your l/o to make improvements and find a buyer for the house. Most l/o’s are from 2-3 years. Yours may be shorter.
Make your l/0 with the seller a longer time period than your buyers so your l/0 won’t be called in first.
Hope this helps.
Kathy
Re: Lease w/option to buy - Posted by Brent_IL
Posted by Brent_IL on August 23, 2003 at 03:39:33:
Tax appraisals have little value because they do not reflect the market. If you have an emotional attachment because this is your home, you can talk further with the owner. However, unless there is steady high appreciation, this is not a good deal for an investor.
I don’t understand who is buying your option.