First Potential Lease Option
I have a few questions regarding a condo I am interested in as a sandwich lease option purchase.
The current owner bought a two bedroom leasehold condo for $160,000 in 1993 at time when real estate prices were quite high here. Since then R.E. prices dropped and only recently have they equaled or exceeded that old price level. Last year, she (the owner) bought out the lease for $39,000. Thus her total cost of this unit is $199,000. She now owns the property free and clear other than the $255. monthly maintenance fee. She is purchasing another condo and is moving into it next week.
She is quite motivated to sell this "old" condo and has lowered the price from $215,000 to $210,000 and is open to offers. This condo is in a three story walk up building in good condition and in a good location. Another condo just happens to be for sale for $215,000 at this time in this building. It has been upgraded with new hardwood flooring in the living room and new kitchen cabinets. A few of the condo in this building are rentals at $1000. per month. Obviously, nothing here will cash flow at these prices!
The most recent sale in this building of 32 condos was a sale in June, 2003 as a "distress" sale at $167,000. The assessed value of the subject property is a quite low figure of only $107,000.
There is no Realtor involved with this sale. Unfortunately, lease option sales are rare here and many buyers are reluctant to put down a reasonable amount to purchase the option.
I would pay her the smallest option amount she would accept and $1000. per month rent. I would then offer the condo for sale at an option minimum of $4000. I would offer a tenant buyer a one year renewable term with monthly rent of $1200 with a $200. credit toward the purchase price. Should I get involved with this property? If so, what is the maximum price that I should offer the seller? (I would like a $15,000 - $20,000. gross spread between cost and sale price.) For what lenght of term? My last question is: In what manner should the $255 maintenance fee be handled?
I appreciate your thoughts on this manner.
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[ Edited by koa on Date 01/14/2004 ]
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