House Cost $110,000, What Would You L/O, And Terms?

Hi,

Can someone use this number: $110,000, and tell me if they were the investor, how they would set up the terms of the L/O.



Here are more details:



It is a HUD house, listed with realtor.

Needs about $50,000 in repairs.

T/B is willing to do all repairs at no cost to investor, just a fair deal on the lease option.



What would you offer as an investor, to the interested T/B.



Thank you, in advance for your time!

Comments(3)

  • bgrossnickle30th January, 2006

    What is the house worth now, As-Is? What is the after repair value? Is the TB paying for all the material and the labor fot the 50k in repairs - what is his day job and what other work has he done? Is the TB qualified to do the repairs. 50k is more than I have ever done, and I have bought burn houses where I needed a GC and 4 permits pulled.

    Many "gurus" talk about LO on houses that need repair, but I do not recall them talking about a house that needs so much repair. Can your guy pull the needed permits, do you want him to do roofing, electrical? Does he have the time and funds to do this 50k in repairs? Definately put in your contract what must be repaired and by what date or he will never get it done.

    OK, I will stop asking questions and try to answer yours. You can not ask for any money down, since he will have a huge out of pocket expenses with the house. In fact, 25k (material and labor are usually 50-50) unrealistic and you should probably agree to purchase some of the materials. Get low rent from him. Just make your money on the sell.

  • bgrossnickle31st January, 2006

    OK, more questions. You have 25k to put into repairs but you do not have the money to buy the house yourself? Will you qualify for a loan in one year so that you can buy the house? Last thing you want is to put 25k and 200 hours into a house that you will not be able to buy.

    Since you are dramatically improving the value of the house, I would like the investor would make the money off the sell. So the investor buys it for 95k. Gives you a lease at just a bit over his monthly payment - probably about 700-750. You of course are responsible for all utilities. Then in one year he sells it to you for 135k. Assuming the investor pays 3% to buy and 3% to sell, he would make 32k.

  • bgrossnickle31st January, 2006

    Also, do push for a two year lease option. Give yourself the extra 12 months to clean up your credit. And I would advise that you go to a recommended mortgage broker and have him pull your credit and give you suggestions on how to clean up your credit so that you will qualify in 12 -24 months.

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