my first lease option -- question - Posted by A.W.

Posted by A.W. on May 24, 1999 at 11:23:08:

Thank you JohnBoy. This gives me a lot of options I hadn’t considered. I appreciate it.

my first lease option – question - Posted by A.W.

Posted by A.W. on May 23, 1999 at 15:24:34:

I have found a home that the owners are willing to lease/option. The home was inherited and has been empty for 2 years. They own it free and clear. It’s an older home but in really good shape. Kitchen was remodeled about 8 years ago. Has new central heat/air. New paint all over. Good, established neighborhood. They are asking $98,500 and want $3000 down with $750 a month (of which $100-$150 will count as a rent credit)for 2 years. The home has 3 BR and 1BA, hardwood floors throughout most, but has some new carpet in a few of the rooms. With the exception of it having only 1 bath, it seems like a perfect opportunity. Here is my problem… I don’t readily have the $3000 to put down. I may be able to borrow it, but would like to avoid that if at all possible. I like the house enough that I might want to live in it someday. But right now I can’t really move, so would like to rent it out. Rent prices for this neighborhood go for around $800 to $900. Can anyone give me suggestions for ways to negotiate this so I don’t have to put my money down up front? I really want to start real estate investing, and this seems like the best deal I’ve come up with so far. Any other suggestions would also be welcome. Thanks!

Re: my first lease option – question - Posted by JohnBoy

Posted by JohnBoy on May 23, 1999 at 15:48:31:

Offer the $3000 to be paid as follows. $2250 as the first 3 months pre-paid rent and $750 as option consideration, ALL due and payable at time of buyer securing a suitable tenant.

Tie up the property under contract then find a tenant/buyer that has $5k to put down as “Non-refundable option consideration”.

You collect the $5k plus first months rent of $900 from your tenant/buyer and pay the $3000 to the seller from that. You pocket $2900 up front and collect the full $900 a month rent for the next 2 months. Your rent has already been pre-paid for 3 months out of the $3000 you put down.

You are optioning at $98,500 so you l/o for $110k - $115k to your tenant/buyer. Also make sure you get a minimum of 3 years on your contract from the seller. Ask for 7-10 years, then 5, then 3 if they don’t except the 7 or 10 years. You can take it with a straight x number of years or do 1 year terms with the right to extend another year for 3 - 10 years, what ever number of years you settle for. But DO NOT settle for less than 3 years. One - two years comes and goes to fast and you may not have enough time to get your buyer to get new financing or financing yourself if you decided to buy it.