Help with Possible Lease option
Hi everyone, I'm still fairly new at this Real Estate Investing biz and have yet to do my first deal, and I found someone that was flexible, but I'm not sure how to structure a deal with her. Can someone offer me some advice?
Here is the information that I have so far...
Newly rehabbed. Owner owned for 12 years, but she bought a new house and moved out. She can afford to hold it for a little while though, so she's not too motivated to sell yet. It is vacant right now though. She's a Real Estate Broker, so she's familiar with the area.
2 bedroom 1 bath
Asking $149K Neg.
Association fee of $109 per month.
Rent in the area is about $950 - $1150 with an average of about $1000.
She has some equity she said, but not too much (don't know what this means, she was very vague)
She is willing to do some seller financing, but wants to know what the terms are before she says anything.
This sounds like a possible sandwich lease option deal, but I'm not sure how what to offer for her.
Does anyone have any suggestions?
Thanks!
Chaffeen,
You said she is asking 149K, is this the FMV of the property or is she already giving a discounted price? I assume is the FMV because she is a broker but can you clarify.
Also, what is her mortgage payment? You need to at least cover that amount plus the HOA and a little cashflow for yourself with your tenant/buyer rent.
These numbers will give you a better idea of what to offer.
Dennis
Thanks for the reply Dennis. It is FMV and not discounted. I'll have to ask her about her mortgage payment again. She was hesitant to offer financial information, so maybe I just need to be a little more clear and forceful and see if I can get more information from her. If I can get that information and she's willing to offer some seller financing, I might be able to do something. Thanks!
Ok,
If 149K is FMV you need to offer less than that in order to increase the difference between your "buying" price and "selling" price to the tenant/buyer. This might be very hard to do if she is not motivated. The bigger the difference the more money you make, plus you can offer rent credit to the tenant/buyer making the deal more attractive to them.
Remember you make money when you buy. Try to get a good discount on that price. I would never pay FMV. Just my way of thinking.
Good luck...
Probably worth giving up on this deal because either you need to buy at wholesale on price or terms. For example, on terms might be a L/O with a purchase price of $149,000 but a rental rate of $900-$1000 per month with some money going to the down payment. Lease term of 2 or more years to capture any appreciation in your pocket. Since the owner is a RE broker and probably doesn't have very much equity because she bought another home, she is probably in a negative cash flow situaton and would not be willing to rent it to you for less than her PITI/Fees amount, which means you would have a negative cash flow. I say, go on to another property ... not worth spending any more of your time on this one.
Taxjunkie
If I don't get more precise answers, I figure this is not a motivated seller? Check back with her in a few weeks. Time can change all things.
Sire
It sounds as if she in not very motivated. Dont' let her "Broker Status" intimidate you. If she is serious about selling, she will come down off of her horse. Go to the courthouse and look up how much she paid for it and when. If the courthouse is computerized, you can also do a search on her name (or property address) and see her mortgage documents to find how much her loan is for. This would give you a good base to begin conversations with her. I agree with the post above that I would not be interested in buying a property at FMV, unless the terms were absolutely incredible.
One way that helps me keep my emotional state from getting involved with an inflexible seller is by following what Donald Trump says. You'll like this, here is what he says has worked for him .........
"NEVER BUY ANYTHING . . . UNLESS SOMEONE HAS TO SELL!"
If this lady sits on a vacant house long enough, she may put herself in a "have-to-sell" situation. That would probably be the best time to start discussions with her. Hope this helps and Best of Success!
Thanks for the reply everyone! I did talk to her again and she's not very motivated. Also, I finally got her monthly payments which were $1300 because she's got a 15 year fixed rate and she's trying to pay it off quickly. Also, she won't do seller financing with me unless I give her a large down payment - which I don't have, and I she since she's paying so much for the mortgage, she won't go down on the lease price - area only rents for about $1000. I guess she's going to have to find someone to buy it outright. Until then, she's just going to sit on it and lose $1300 a month.
Thanks again for all your advice though. Being new, I'm grabbing at everything, even some things I should be grabbing at.
NEXT....
No deal is better than a bad deal anyday.