Getting Handyman To Do Repairs Before Moving In On Handyman Special L/O
Please forgive my lack of details here, but I read something recently on another site that I can't seem to find, and it sparked a question.
The poster was talking about purchasing a house (I think it was sub2, it may have been L/O) in need of repairs. He then talked about simply selling on L/O as a handyman special. He liked this because he got a good discount, yet did not go out of pocket for the repairs.
The problem he reported was that his first two TB's claimed to want to do the repairs, yet never did them. As soon as they fell behind, he evicted them. He said the lesson he learned after the second time was to make sure they did the repairs BEFORE moving in. However, he never gave any details as to how to achieve that.
If this were your intention, how would you structure the agreement with the handyman/TB?
Hmmm... anybody at all?
Since I posted this, I have heard a couple people say this is their favorite way to do business... yet I haven't found out what they stipulate in the contract or how to try and make sure the work gets done... or if they just don't care so long as the TB pays the monthly.
One way to structure the L/O in this fashion is to have the TB incur the expense of the repairs in lieu of the option fee. The purchase price would be set on the value after the repairs. A clause should be inserted in the contract as to the exact work and repairs the handyman/TB is to do for this concession and a specific time frame he has to complete it, otherwise he is in default.
Just one way to do it. Other posters can give you other ways. Good Luck.
Dave
[addsig]
I was thinking about maybe having them come up with a certain amount of consideration $, then disbursing some of it back to them for materials to make sure they're not giving you their last $10 and won't be able to pay for the materials.
Would you always have them take occupancy prior to the repairs?
I think you are looking for problems going this route. I would recommend just simply painting the outside, cleaning up the yard and selling in the paper by owner as a "handyman fixer." If you are going to do a lease option, why dont you shoot for the following:
-Purchase a property at 80% of market value that needs no repairs.
-Put an ARM loan on it.
-Lease option it out and require a non-refundable $5k deposit.
-Make your purchase price 10% above present market value.
-Take advantage of the positive monthly cash flow, and the future value that you are going to sell it for.
-If they dont perform in a year, keep their money, do it again, or give them the opportunity to come up with another $5k for another option.
The statistics show that only 50% of people excercise their "lease option." One key thing you need to do is make sure their credit is decent and put them with your lender so he can work with them to clean it up and purchase your home in the next year.
Best Riches,
Jeffrey Adam
_________________
"The only place success comes before work
is in the dictionary."[ Edited by JeffreyAdam on Date 05/29/2004 ]
Agreed. I guess I should have been more specific. I meant that I would rather avoid the fixer-uppers for now and focus on pretty houses (sub2, L/O, etc). I'm just trying to see how to deal with a handyman special if one drops in my lap that's a particularly good deal.
Quote:
On 2004-05-31 09:59, thestudentisready wrote:
Agreed. I guess I should have been more specific. I meant that I would rather avoid the fixer-uppers for now and focus on pretty houses (sub2, L/O, etc). I'm just trying to see how to deal with a handyman special if one drops in my lap that's a particularly good deal.
Why not just wholesale it? Then you don't have to worry about whether the repairs actually get done, and you move on.
Robert
[addsig]
Always an option, of course... I'm trying to see about covering the bases if I can get the deed without putting myself out, and there's not enough in it up front for a rehabber.
For instance...
ARV= $100k
Existing first for $80k
Repairs needed = $4500
Seller ready to walk and will give deed sub2 for $500 in U-haul $.
It's a case like this I'm trying to find a solution for. This is above MAO, so I can't wholesale it. I suppose it could just be optioned. I'm wondering in such a case if I should take the deed.
If so, since it can't be wholesaled, I was trying to figure out how to make it profitable. Seems like an L/O candidate, no?
My thinking... Even if the up-front $ is a wash, there's 15k in equity after repairs. Add in an extra $10k to the backend due to the sale method (option sales price =$110k), and an extra $200 or so monthly over the note, and this could still turn a hefty profit over a couple of years... but the repairs would have to be done for the TB to get financed at a reasonable rate to be able to cash me out.
Since a large part of many repairs is labor costs, I would think it would be preferable in a case like this to try and find a handyman TB to give me maybe $1-2k down as option $ and earn the rest because ultimately, I don't want to come out of pocket for a sub2 deal (at least after the seller is paid-off.)
Am I looking at this right, or would you not sub2 something like this?[ Edited by thestudentisready on Date 05/31/2004 ]