Re: Possible Lease Option - Posted by JohnBoy
Posted by JohnBoy on July 02, 2003 at 23:35:05:
NO! Where’s the beef?
She has a 500 score which says she has bad credit. Then she has two more collections in the past 6 months. She doesn’t pay her bills! How can she pay to keep up the property when she can’t pay her bills?
And you want to obtain an $80k loan in YOUR name, where you can get $100 per month for two years and a $10k payday on the back end? That’s a potential profit of only $12,400 over TWO YEARS! And this you are willing to gamble on that all goes to plan based on having LUCK that she performs???
To even consider this deal, I would need at least $5k up front from her, and the option price would be at least $115k. If she can buy in two years then her $5k option money would be deducted from the $115k purchase price, leaving her a balance owing of $110k to buy the property. That would allow you a potential profit of $37,500 over two years and that is if everything goes to plan with her performing.
You said you have comps to support $100k+ now. Two years from now the property should comp at $110k - $115k.
Are you running a charity for people with bad credit that don’t pay their bills or are you running a business? She carries to much risk to consider anything less and even that is a big IF.
I wouldn’t do this deal for a person with excellent credit for only a potential profit of $12,400 over two years, muchless someone with bad credit and recent collections within the past 6 months when they knew they were going to need new financing to buy the house.
She “might” have been able to buy this property for $80k had she not allowed her credit to get worse than it already was. But she didn’t do that. Instead she allowed it to get worse. Now she can’t buy squat! To buy this for $80k yourself and L/O to her for $115k getting $5k option money up front would be a GIFT to her at this point. It’s either take the GIFT you can offer her or move on.
Even at these numbers you run a high risk of her not performing and getting stuck with repairs and paying the mortgage if she doesn’t perform. You could easily lose $12,400 over this should she become a problem. She is not worth the risk of hoping to get lucky she performs.