Lease-Option Situation
Hello. I have the following situation. An owner has 2 loans: 375K and 70K. Property value around $500K.
He is in need of money. I guess his credit is shot since his business failed. He is going thru divorce.
He wants to get some cash and he agrees to a lease-option deal. However he wants to rent out the property for 1-2 years.
Is there a possible deal here?
Thanks in advance,
Alexander.
It depends.
What are area homes selling for? (Are comparable homes selling for more or less than $500k?). What can the house rent for?
With a 89% LTV house in California (I am assuming that is where the house is since that is where you are from), I would think that it would be difficult to make this deal work. If you can lock in the rental rate at market or below market rent AND get a 2-4 year lease option (I tend to go no less than 2 years on the lease options I find), you will reduce your risk and increase your likelihood of making money, since the upside is more potential appreciation.
If the area homes are not appreciating, you will need to get a term of greater than 2 years, so that you can capture some upside appreciation. Think of it as buying a stock option. Would you pay $10 as option money for 1 share of stock selling today for $100 if I also told you there is a 80% chance the stock will not increase in value during the 2 year option you have? I call that gambling, not investing.
If you like those odds, go to Vegas. If not, lock in your profit on the front end of the deal ... then you are a real investor.
Hope that helps,
Taxjunkie
Try and make your money upfront and everything you make on the backend is "gravy"
Also, in a highly appreciating market, I would highly recommend making sure you that you are covered by putting the deed in escrow so in 2 years when the property is worth 100k more, you will be more protected.
As for if you have a deal, I don't believe you give enough information for anyone to decide.
What are the payments?
What can you rent it for on a l/o?
Can you get any monthly rent credits? (Hopefully on a property of that price you can get 400-500)
What type of money does the seller need upfront?
I could go on and on but these are some of the basics that you will need to help us make a decision.
I will help you on this... I am a broker. Give me the purchase price, avg rental price, Approx taxes, money owner would put upfront. I will do a little work and email different results from different programs so you can decide for yourself if it is worth it or not.
Carl feathers
mortgagefast@hotmail.com