L/O To A Current Tenant
Hello all,
I have been investing for one year. I have only purchased three properties ( one duplex and two sfd). Both of my tenants in the sfd's would like to purchase the home from me and I'm not sure how to execute this. Both have bad credit and at least one has no down payment. I am hoping to do this soon and I'd appreciate any help. Thanks!
If their credit is of serious concern than your best route would most definitely be to L/O. Since you already have leased the property to them I believe you would just need to sell them the option to buy and then put a credit towards the purchase price every month, which also may entail raising the rent slightly above market value.
Your attorney should have the lease option paperwork or you can get it from one of the knowledgable people on TCI.
Joe
Sell on L/P and the non refundable down can be collected as additional monthly payments...
Just about every tenant I get wants to L/O. But most are hopeing you will keep the rent the same and just give them credit toward buying. They cant afford to pay much more rent. Make sure it is worth it. In my area I have no problem getting tenants. I would rather have the income which increases each year and the appreciation. Others will disagree but in my high demand area L/O is not the best option for me.
Keep in mind you don't HAVE to give them a monthly rent credit. You can structure it however you like.
Good Luck!
Since I am new at this I've been panicky that maybe I'm in the wrong area or something. Both have positive cash flow so i guess I can slow down ( with these properties) and just rent. I would like to purchase more homes and am down payment poor. Any recommendations on whether to try to L/P on my next property or "subject to", or some other method. I'm flying solo so any navigational aids would be a great help. And Thank You!!!!!!
Personally, I like to buy and hold especially if it has a positive cash flow. Depending on how long you've had the duplex you might want to take out some of your equity in them. Rates are great now, perhaps you can get a 15 year fixed and pull some of the equity or perhaps get a HELOC and use it for other properties. Schwab has a great HELOC that is 1/4 point below prime. Best wishes and good luck.
What is an HELOC ?
Home equity line of credit - to answer your question. The duplex is in a great area for appreciation but I've only had it 6mos. I'm also very leery about over leveraging. What are some good parameters for leveraging?
Good parameters for leveraging?
Are you looking for cash flow?
Keep loan balances/terms such that cash flow is what you desire.
Looking for highest yield?
The closer to $0.00 down, the higher the yield, if the property is appreciating.
Appreciation %/yr X Leverage factor = yield due to appreciation.
Leverage factor = $Down/FMV
How is it you can get a 125% heloc when the lenders I talk to only go to 80% and tell me I have no equity to take out? I am definitely looking for cash flow.
Hey beth. On investment properties you can usually get a heloc up to 90% of the house value. The rates are a little higher on investment properties. The 125% LTV loan is not available on Investment props. Just your Primary residence. And the rates on those suckers are very high. Not worth it in my opinion. (Unless you have a couple great deals around)