I just backed out of an offer to do a lease option to purchase. The home has an ocean view and was originally listed at $1.5 million but has been reduced to $1.29 million. The house is vacant and has been vacant since June. I offered to pay 10,000 for the option right to buy the place for $1 million. A 6-year term with $4,000 monthly rent.
I backed out because I talked with a property management agent who informed me that my chances of finding a tenant to pay more than $4,000 a month in the local market were "slim."
I live in San Diego County so I am somewhat familiar with the area.
I am seeing signs that our "Hot" real estate market is cooling down a little and more and more pieces are going on the market. Some well respected REI in our area say that our market will slow throughout the end of the year and the appreciation we have been experiencing will no longer be a reality. They also say that the more expensive luxury coastal home will be hit first and hit the hardest with this slowdown eventually moving inland.
Bruce Norris says that we will see foreclosures in our area increase by 1000% from 2005 to 2009. That's right, 1000% and he seems to have the research to back it up.
Our market will always rebound as it did from the early 90's which was the last time we hit a glut on the market.
Did you do the right thing? I think only you can be the judge of that as you are closest to the deal and know the numbers. The term is long enough, I believe, to survive the market change. The biggest question is what happens if the real estate agents are right and the $4k+ rental market has dried up? You have to ask yourself if you can suffer that kind of monthly negative cash flow. If the answer is that you could not, you probably did the right thing by backing off the deal. Good Luck.
I live in S. Florida and have had great success with L/o where most people don't. It definately depends on your market. People L/o mainly for two reasons. First, they have crappy credit, but have some cash and want the hope and dream of home ownership which you are offering to them. Second, they can actually get a loan and afford the place, but want to know if they like the area. The only way for you to really know is perhaps spend a few dollars on an ad and see what kind of response you get. If you were willing to go on the line for 4K a month, then a few hundred on a well written ad should be no problem if you stand to make a fat non-refundable option fee and a massive spread 1-2 years down the line.
Curious how do you write the ads to attract people like that?
What the nature of market(middle class, upper), home prices, rental market, whatever condition you think will create good oppotunities like yours. I am in CA which is different I guess from FL.
Hello James,
I would reccommend you pick up books by both Bronchik and Conti/Finkel regarding Lease Options. Also Bronchik has a pretty good course on the subject.
Are your properties in California that you are considering offerring Lease Options on?
Dave
[addsig]
I just backed out of an offer to do a lease option to purchase. The home has an ocean view and was originally listed at $1.5 million but has been reduced to $1.29 million. The house is vacant and has been vacant since June. I offered to pay 10,000 for the option right to buy the place for $1 million. A 6-year term with $4,000 monthly rent.
I backed out because I talked with a property management agent who informed me that my chances of finding a tenant to pay more than $4,000 a month in the local market were "slim."
Q: Did I make the right decision?
wtwyman,
I live in San Diego County so I am somewhat familiar with the area.
I am seeing signs that our "Hot" real estate market is cooling down a little and more and more pieces are going on the market. Some well respected REI in our area say that our market will slow throughout the end of the year and the appreciation we have been experiencing will no longer be a reality. They also say that the more expensive luxury coastal home will be hit first and hit the hardest with this slowdown eventually moving inland.
Bruce Norris says that we will see foreclosures in our area increase by 1000% from 2005 to 2009. That's right, 1000% and he seems to have the research to back it up.
Our market will always rebound as it did from the early 90's which was the last time we hit a glut on the market.
Did you do the right thing? I think only you can be the judge of that as you are closest to the deal and know the numbers. The term is long enough, I believe, to survive the market change. The biggest question is what happens if the real estate agents are right and the $4k+ rental market has dried up? You have to ask yourself if you can suffer that kind of monthly negative cash flow. If the answer is that you could not, you probably did the right thing by backing off the deal. Good Luck.
Dave
[addsig]
I live in S. Florida and have had great success with L/o where most people don't. It definately depends on your market. People L/o mainly for two reasons. First, they have crappy credit, but have some cash and want the hope and dream of home ownership which you are offering to them. Second, they can actually get a loan and afford the place, but want to know if they like the area. The only way for you to really know is perhaps spend a few dollars on an ad and see what kind of response you get. If you were willing to go on the line for 4K a month, then a few hundred on a well written ad should be no problem if you stand to make a fat non-refundable option fee and a massive spread 1-2 years down the line.
havacigar2,
Well congrats.
Curious how do you write the ads to attract people like that?
What the nature of market(middle class, upper), home prices, rental market, whatever condition you think will create good oppotunities like yours. I am in CA which is different I guess from FL.