L/O A Property With Subpar Equity
I am thinking about a l/o on a property with barely decent equity. I wonder if some of this experts this is a good deal or not. Here are the numbers and the reason why I am doing an l/o:
My investor backed out of the deal, because he said even though the equity was there, he didn't want to take a loss paying the monthly payments until the condo was sold. Should I go the l/o route, or should I try to refi the mortgage? I think I should do the l/o thing since I am a college student who works part-time, which means I most likely won't qualify for a mortgage. If I went the l/o route, the numbers would look like this:
$126K is the purchase price
$140K is current retail value, although some have sold for $150
I would ask for a nonrefundable down payment of $3000*
I need about $1500 to break even, so I would charge $1600 a month, and a $100 from each month would go towards the overall purchase price
The l/o would last 2 years
There would be a contigency clause to have them move out if I sold the house before the 2 years was up.
*Of course, I would refund their down payment if I sold the house before the 2 years was up.
Let me know your opinions,
Aram
what you wrote is not a L/O .... its trouble... Have you already got the property under contract? What are the exact terms you are offering the seller?
1500 to breakeven on a 126,000 offer?
retail 140,000... and you want 1,600 a month....
you want to refund... Never...
somethings not adding up
DaveREI,
I do not have the property under contract. I can probably negotiate the price to about $120-123K. Since I don't have the money to buy it outright and sit on it, I was thinking about doing an l/o. The refund was just in case I sold the property before their lease was up. I.e. if I sold the property 4 months into the lease period, I would give them a month to move out and their deposit back after I closed. Is this completely wrong? Should I absolutely never give the down payment back? If so, and I find a buyer before the lease is up, do I just kick the tenants out with no refund? Please advise.
Thanks,
Aram
purchase at 120k - 2 yrs or longer
monthly payment=mortgage payment
lease purchase to tenant buyer at 140-150k
1500/month
for 1 year
non refundable option deposit of xxxxxx
if they dont exercise option get another[ Edited by DaveREI on Date 10/31/2003 ]
So I guess then this is a decent l/o deal?
Should I have any qualms?
Thanks,
Aram
Dave has some good advice and sounds like if you structure the deal as he said with or without rents credits.
I would however check 2 things, first do a survey on the rents in the area for a like property, and charge the max you can get, if your survey shows your rents to be higher than the market you may have to adjust through credits.
Secondly Condo's can be tricky, check with the condo's assn to make sure they allow you to lease this condo, some do not want anything but owner occupied, if that was the case you would either have to live there or put on a contract for deed right away, giving up any future appreciation.
Darwin in NM
Are your rental figures realistic? In Southern California they are not. Here you can rent a house with market value of $350,000 for $1700 per month.
Each market is different, you must investigate.
Eric & Rosa
[addsig]