Rent Too HIgh?
Normal rents in my area are $975. I have a house I am about to L/O but there payments on a 104,000 loan PITI is $1300. Is there anyway my tenant will ever pay this? The payments are so high because they refi'd at 13% because of missed pmts. Has anyone done any deals like this? :-?
You can go negative for a year or two until you refinance. You can also sell your new tenant on the idea that the overage payment is for the option. In exchange for the $400 a month in overage payment he gets this wonderful option to buy the property at a set price.
Just think he will not have to worry about the upward spiral of property values and rental rates. He is set and Oh my god this biggy hunk of cash that he pays each month makes it all possible.
Of course if you are really good at negotiation you beard the lion in his den. You appear before the head of Loan Service and you point out to him that the high payment rate will negate all efforts to keep this loan current. If he would take a portion of interest and place it as a debit amount on the back end of the loan for a year or two all will be sweetness and light and the payments will made on time.
If it were me I would probably just take it negative for the year or so it takes to get to a refinance. You can of course recoup on that happy refinance date in the future. You merely increase the ultimate purchase price of the property.
See is not the capitalistic system fun. Just another little game in the quiver of the Real Estate Investor.
Cheers Lucius 8-)
this is not a deal to L/O. offer to cash them out . At your lower interest rate the payment will be just slightly more than half what it is now and you will be positive cash flow.
Yes the capitalist system is wonderful, but I think you're using the wrong arrow.
I take it you are in the middle of a sandwich lease. If so, and you are lease optioning from the seller, why are you willing to pay $1300 when fair market rent is less than $1000?
What was your motivation to enter this deal? Is is possible your tenant-buyer would have the same incentive?
This qualifies for entry into the "bigger fool" contest. You have a negative cash flow of $325/mo (1/3 above market rent)on a property which probably doesn't have any equity,no profit,no reserves for replacements, no vacancies or collection loss reserves www.etc.etc... Why??? I can get you all of these that you want -until you go broke.
You must have read my book, "How to run a fortune into a shoe string". This is not a viable L/O deal. There are a few ways to get this rent amount. I don't want to suggest them because you should pass on this deal.