Please Help! First Deal
I am in need of some advice and TIA for all replies! Myself and 2 partners are just getting started in REI and we have negotiated our first deal. The details: 2-Unit property with appraised value of $55K. Seller has agreed to purchase price of $43,500 with terms being no money down, $500 per month for first year, and payoff of remaining $37,500 at end of year. The units currently do not have tenants, however, location is an excellent rental market with $900-$1100 fair market rent expected after filling the units. The problem now is we do not know which type of legal form to document this transaction on and what details should be in it. We want full property rights during this first year so we can upgrade the units. Again please help and all replies are greatly appreciated.
Thanks! :-?
Full property rights? = the deed to the property in our area.
Here is one of many suggestions you may consider. The units are vacant and appear to need repairs.
1. The repairs alone explain the 1 year discount from the seller. So realize you are creating an agreement at the retail price. (due to needed repairs)
2. If true that ALL payments apply toward the principal; consider extending the agreement a second year. (This is a benefit of the lease option - principal is accelerated)
3. Why is the deed so important at this time? Are the apartments in need of considerable repair? In our metro area a $50K property with 2 units does not get $1000 per month in rent. ??!!
Our concern is the long term effect of with 3 partners. Be careful, because someone has the intelectual property of REI which is not secured on paper.
Obtain legal advice from a real estate attorney and create a lease option contract.
[addsig]
Thank you for your reply. All I meant by full property rights was having the authority to make repairs, updates, and improvements during the first year of the agreement. I do not think the deed is necessary for that. The apartments are habitable as they are, however, they can be considerably improved for less than $5-8K and bring more rent. These are suburban units that have excellent access to a major thoroughfare in our area which is in high demand. There is a 3BR/2Ba unit and a 2BR/2Ba unit which in this are rent for $600/$400 respectively. I was curious about the warning about the long term effect of 3 partners. What are the possible pittfalls of this? Also, is there a generic affordable lease option contract we could download and alter rather than incurring the expense of a real estate attorney? Thanks again!
from your info. you don't seem to have a full understanding of a l/o. the atty. expense would be well worth the piece of mind...........km