Possible First Deal
SFH in pretty good shape really. Needs interior paint and WW carpeting. It's a 4/2.5, 1600 SF. Appraisal is 110,000, and the deal is purchase price of 99K, with seller running 10% through my account for closing, and with 5K back to me at closing for repairs. My loan will be for 90K.
I intend to put a tenant buyer in place w/ 5% as option payment. Rent=PITI for term of L/O which is 1 year. Sales price will be
110, 000(100% of appraised value)
I then cash out at $104,500, which is sales price minus L/O payment, minus my 89K loan balance for a 16K payday. Add in the 5 K at closing and the $5500 and the total payday is 25k or so.
Sounds awesome, am I kidding my self?
Also how often do these lease option tenant buyers ever really qualifiy for a mortgage?
I don't think there is enough information here to say if this is doable or not.
Do you already have your tenant/buyer lined up?
What will be the monthly cash flow? Can you get enough of a monthly payment to cover all your costs?
you mention cashing out at 104.5k. That is 95% LTV. Sure you can do that on a non-owner occupied property?
What are the cost of your first loan (the loan to purchase) and what are the costs on the refinance? Even if you aren't paying points, you will have all sorts of costs (such as appraisals, title work, etc.). Maybe I just don't understand what you mean when you say the seller is running 10% through your account for closing. Do you mean he is paying closing costs? I guess what I am unclear on is if the sales price is $99k, how is your loan for $90k?
Are you going to actually repair the property with the $5k?
I hope others here can help you with some more answers. I do rehabs, not lease options, so I look for a lot more of a spread before I'll even consider the property...and even with a decent spread, I don't make $25k on a property.
John
You left out positive cash flow. That gives you a little more profit. Sell at tomorrow's value, and collect a down payment based on that value today. In other words, sell it for $120,000 with $6,000 in nonrefundable consideration. About half will exercise their Option, but you can increase the odds if you are truly wanting to help the T/B.
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Actually, you may get even more in a year (after paint and carpet).
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