Investor meeting with seller tomorrow
I have a meeting with a seller tomorrow. The house is being sold by the owner. They will be moving out of the area within a month due to a job relocation.
After talking with both of the owners for a while they would be willing to talk to be about a lease option. Since I have never constructed a deal with a lease option. I need some help. They have only been in their home for about 2 years.
They owe about $110K, piti $1123/mo., they are trying to sell it for $123K. I think the home is worth about $127K. It is a 3bed 2bath home with approximatley 1700 s.f.
How should I make my offer and terms for the home?
Put in an offer for a lease option with $1200/month with 25% going to the down payment. I would purchase it for around $125k since it is a lease option. Or I would purchase it for $123K plus improvements you make to the property.
Personally I don't do lease options I would see if he is interested in a seller cary-back if so I could help him
structure the deal so he will get the most out of his note in either a simultaneous close or of full or partial
purchase of note or sale at later date depending on their needs.
If you do a lease option. Make the offer have rent money going towards the down payment.
I also find it peculiar that the seller is willing to do a lease option even though they are moving out of state.
Make sure that if you are going to do a L/O (especially with someone moving out of state) that you get them to put the house into a land trust. This will help if there are any lawsuits against the owner, AND will help prevent a line of credit from being established against the property. The Trustee is the only one legally able to set up a line of credit.
I noticed the same thing cyndyb. When I relocated, I had to sell my property.
First, have you offered to buy the property "subject to" the
existing loan, with the agreed upon price difference, if any, in a second
note? That would be the cleanest way. If they are not agreeable to that,
I would try this approach. Do a lease option, for say 115K, with nothing
down as option consideration, for 3 years. Payment of $1200/month, giving
them a small profit of 70 bucks. First payment in 60 days.
Now, what will the place rent for fair market value? Try to get $1500/
month. That will give you some positive cash flow, but you really want to
sell it on another lease-option, for fair market value, say 130K, with
$5,000 down, a 1 year renewable option. When the tenant-buyer exercises
their option, you will receive $125K, plus the $5K down and the $300 per
month positive! Toatl profit? 18K! Not bad for NOTHING down!
If they do not exercise their option, then you keep the monthly positive,
their option money and do it all over again! Only this time raise the
selling price to 133K. Hope this helps.
This might be a good suggestion for a lease option. I don't know if the user knows what a "Subject To" is.
A couple things.
first have you run your comps, checked out the back-end, and tried CFD or
Sub2? A lease option gives you very little control in the situation and
unless the seller wont go for it, don't use it. have you signed anything? if
yes, what?a PSA? i dont have enough info. AHHHHGGGG!!! sorry, frusterated.
have you done ANY Due diligence? have you got the contracts you need, with
the proper exit? what's your market right now? can you afford to "EAT" this
one if you have to?
What's the SELLERS MOTIVATION? from what you've said, doesn't sound
motivated.