Possible Lease Option deal? - Posted by JohnM

Posted by Jay (MI) on July 10, 2003 at 10:37:52:

I owuld be concerned about trying to get $10k in non refundable option consideration. I think that you would be *lucky * to get $5k. Todays mortgage market is making it more and more difficult to find that kind of tenant buyer. Also, have you discussed the possibility of them actually paying you $400/mo? If they were paying $400/mo that would take your rent down to $800, and cash flow would be $400/mo.

The adjustments that I would make on the offer would be to adjust the selling price based upon the fair market value, if you have the comps, show them to the seller, how can they argue with that? Also, see how long they will let you extend the terms, have the option to take control of the property for up to 4 years if they will let you. Good luck on the $400/mo from the seller. I would start there and settle as high as $1,100 as most L/O home rents are almost 1% of the selling price (around here some people multiply by .0096) which would be $1,600 (with rent credit included).

Possible Lease Option deal? - Posted by JohnM

Posted by JohnM on July 09, 2003 at 16:43:59:

Hey folks,

Thought I’d see if anyone has some advice on a potential lease option deal:

Couple calls on one of our mailings with a house worth $155,000 (pretty house in nice neighborhood). They want to move a.s.a.p. up to Indianapolis, IN from Bloomington, IN. The wife drives everyday from Bloomington to Indy to work (1.5 hours). She’s tired of it. Husband works in Bloomington but is ready to get a job in Indy as soon as they can sell their house. They don’t need all their cash out now because they plan on getting an apartment in Indy when they move.

Here are the numbers:

FMV $155,000
Asking $160,000
Owes $118,000 1st + Home equity loan of $5,000
Monthly payment $1,200 PITI
Market Rent $ 900 (according to seller…I think that’s too low)

If they sold the house with a Realtor they’d be looking at about $16,000 in closing costs (3%) and Realtor fees (7%). I want to see if I can get them down to $144,000 to $148,000 and ask them to pay $400 per month toward the mortgage to recoup the differnce between their mortgage payment and the market rent plus an additional $100 to make it worth our while on a monthly basis. I also think they should make the next 3 months of payments unless I find a tenant in that time period.

Potential Offer:

Buy $148,000
Monthly $ 900 (seller pays $400)
4 Year lease

Back end:

Sell $169,900
Monthly $ 1,200
Non-ref Option $ 10,000
2 Year lease

Any ideas on an offer or offers would be appreciated:)