Is This A Viable Deal?
My neighbor's house has been vacant for 2 years and needs some ($6k) work.
It is worth "as is" about $120k.
It can rent (upon work completed) for between $1100 and $1200/mo.
He purchased it in 1999 for $60k.
It has an additional parcel (50 x 110) for which he payed $10k at the same time (worth apprx $21k).
Both are available to me on a lease option. I would be interested in living in the home for 1 or 2 years and then subletting, exercising an option during the 3rd year.
In 3 years, with repairs completed, the home with add'l. lot should have a market value of $155k to $165k and it should rent for a bit more.
Does this scenario make sense and does it represent a viable opportunity?
The owner is not motivated, as he putzes around in the home, doing "projects" now and then, and he is not forthcoming as to what his asking price would be. However, he is open to a lease option, and would like to sell if the right offer comes along.
I will be marrying soon and the house would answer my immediate needs. We like it for all the reasons we would want any house in the area: the neighborhood, the commute is short, good shopping, good schools, good highway access, nice size parcel, home is in good shape, it's the right size for us right now and it should appreciate at a pace consistent with the surrounding area residential improvements.
Any advice or suggestions? What questions do I need to ask?
Thanks for your time and consideration, folks.
perishhate
Hey Perishhate:
I'm new here and really like the dialog on this board.
Interesting situation. What's the option price the owner is giving you? What's his PITI -- is he charging more than his payments to you as a premium? Do you get a rent credit? Who's paying for the repairs & maintenance? How much are you putting down as a consideration?
If he's truly unmovtivated, I'd expect the numbers to be "retail". Are you going to be able to qualify for a mortgage in 3 years to exercise the option? I've read that 95% of tenant/buyers do NOT exercise their option and lose their consideration money.
It seems like he's got a decent amount of equity in the place and likes tinkering around. Is his plan that he wants out in 3 years?
Lots of question here that need answers to see if it's a good deal, I believe.
Good luck
JPLives4Surf
Hey JP,
Thanks for the reply. I can see I have much more information to gather.
The current owner is not forthcoming with information regarding what he is currently paying on the home. He did mention that he recently refinanced.
I researched the property with the village and county, as it is on a double lot, and I find he is known at village hall as "the land baron."
He owes many vacant parcels and three homes in the neighborhood.
I think I'm going to back off until he wants to be more open.
It is a shame, because this house fits many of my needs, and will get a good rate as a rental later.
I'll post more info when I have it, I'd appreciate discussing this more.
Thanks again for your reply and insight.
Perish Hate
OK, you can obtain a lease option for both DuPage County parcels so take our advice and NEGOTIATE the terms of the LO (lease option)
Eric & Rosa
[addsig]
Perishate,
Though new to the field, 2 lessons I've learned is "fall in love with the deal, not the property." You sound a bit enamored with this house as the only option right now. The land baron will sense this and use it against you.
Lesson 2 I've picked up on is that the deal of the decade comes by once a week. There are probably other properties out there now, or soon will be that can meet your needs as well or perhaps even better. Glad you were backing away from the land baron's game of hardball.
Good luck