Buying At Market To Use Sell As Lease Option?
Is it a bad idea to buy a house at market price and sell as a lease option. The houses in my area go up about 10% per year. When looking for property to sell as lease option do you only look for property with equity?
Thanks,Chantelle
Quote:
On 2003-11-01 16:40, chantynicole wrote:
Is it a bad idea to buy a house at market price and sell as a lease option. The houses in my area go up about 10% per year. When looking for property to sell as lease option do you only look for property with equity?
Thanks,Chantelle
You need to do a total review of your objectives. Many investors these days opt for low to no cash flow in high apprecitation areas. Unfortunately you can only do so many of these deals.
If you could sell at L/O with the option price set at the prevailing appreciation rate - and you got your financing the way you want it - this will work if it meets your objectives.
Most of the time you need to either cover your financing or buildin your margin at the option price.
I
[addsig]
Dear Chanty Nicole, nice seagoing name.
Yes you are doing exactly right. If you can gain a better equity position, well go for it. If not. Nothing wrong with the plan.
I have an edge, you must expect that. You see, I am a Real Estate Broker.
This is what I do.
I take a listing and show the owner all the comps, and appraisals and BOP that I can find. He/She/It arrive at a sales figure and I list and put it on the MLS and I talk it up and I run around like an idiot trying to sell it.
However in my listing agreement. I offer to buy the property if it has not sold in 90 days. My agreement to buy is at a slightly reduced figure which usualy is at about 90 percent of true repeat true market.
Of course if they so desire, I buy it at the 90 day mark. Or even sooner if something comes up. Like a new job out of town. Applying as a credit on the sale, my Commission and their escrow and closing costs. On a small itty bitty cheapy house I am now down to about 80% of market. I run my own closing, as a Real Estate Broker I am allowed to do this. I short all the paper work and record the Deed and I am the owner. Next payment of Mortgage due in 30 days so I hop to it. Find the really great upward mobile young couple, both working who want a house but just do not have that big 20% down. They lease it for a sum above the mortgage payments and other running costs. They give me a consideration for the Option a one time payment about 3% of purchase price on the house. If they have problems latter on. I will still help them get the house by taking a second back or even better a Wrap Around at equal interest. Whatever. Now was not that fun. Everybody wins. The Young Couple, The House, I help paint it. They move in. I furnish a bottle of good Champagne and two proper fluted glasses on a small tray with napkins.
It is my experience that as a Mortgage Broker within the next six months I also refinance the house to obtain a better interest rate.
Does all this make sense? To me it is just one of the advantages of being a Real Estate Broker.
Always work for the complete satisfaction of all parties in Transaction. The Seller, The Buyer, The Real Estate Broker.
Reverently Lucius[ Edited by joel on Date 11/03/2003 ]
Yes you can do it and it is encouraged by a lot of gurus. One word of caution though. Buying while counting on double digit appreciating is not tru investing. It is called speculation, and is riskier than buying at 80-85%. If the market levels or falls in your area, do you have the resources to withstand the storm. Not to dampen your spirits, just showing you the other side so that you can make an informed decision.
Good Luck,
SHawn(OH)