Rent To Own
I have been rehabbing/selling and rehabbing/renting for about a year. A mortgage broker that I work with just called me to tell me that he has a buyer that has found a house which is a repo. The buyers do not have the credit to qualify even though they have a significant amount of cash. The mortgage broker called to ask me if I was interested in buying the house and doing a rent to own contract. This sounds interesting to me, but I have never done it. How do these things typically work? How can you get hurt? What should I be looking for?
Here are the particulars of the deal
Purchase Price: $110k
Fair Market Value: $140k
I would probably do 10% and a 5 yr. ARM.
Check those comps; don't take the mortgage broker's word for anything. All in all, this sounds like a good deal (if in a decent neighborhood). Is the house in good condition?
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Thanks. I am going to check everything out on Friday. I have a trusted RE agent that will help me with the comps.
The bigger questions is: How would you structure the deal?
Just buy it and then L/O to a T/B at a little higher than FMV.
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My guess is the T/B will want the excersize price to be less than the current FMV - this is probably the stickiest point you will face - they truely know your purchase price, and probably only want you to earn a profit on the interest.
I'd offer the house to them at a serious discount from the current value, but high enough over your purchase costs so you can earn a capital gain as well as an interest rate spread profit.
good luck
You can always find another T/B if they aren't willing to pay FMV.
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