Question Regarding L/O...deal Pending...
Please help me understand how I can turn this opportunity into cash.
I found a L/O on a home with a FMV of $175k.
My purchase price is $170,000.
I can lease it for $1000/mo with $500 per month going to down payment. The initial option consideration is $2000.
Can I flip this to another buyer, or are the numbers too tight?
Thanks for any help...
Quote:
On 2003-12-18 15:37, johnqreplies wrote:
Please help me understand how I can turn this opportunity into cash.
I found a L/O on a home with a FMV of $175k.
My purchase price is $170,000.
That is not a lot of equity. As a matter of fact, that may not even be equity unless you are absolutely certain of your comps.
Also, what is the aprreciation rate there?
I can lease it for $1000/mo with $500 per month going to down payment.
Thats a lot less than the mortgage payment would be. How long is the lease and option good for? The longer, the better. 12 months = $6,000.00 off 24 is 12k and 36 months is 18k.
The initial option consideration is $2000.
Maybe you can get a bigger option deposit.
Can I flip this to another buyer, or are the numbers too tight?
What are the comparable rents for a house of this caliber? Can you get $5,000.00 option money an $1500.00 mo with no rent credit? Even if the option price was 175k that would = 5k backend 5k option money= 3k profit $500.00 per month is spread, over 3 years is 18k and the rent credit over 3 ys = another 18k for a grand total if all the stars align of $41,000.00.
But.... there are a lot of variables that have to do with your specific market, and not knowing your market, my initial reaction is that the price is too close to FMV. I gave you the guru look at it, what is the reality?
Good Luck,
Shawn(OH)
Thanks for any help...
Hi John,
This deal sounds a little tight. First, you have to make sure that fair market value is 175K. If it is, then negotiate with the seller for a price of 165K. That should leave you with enough room for profit. Also, what is market rent for the property? Ensure that market rent exceeds the monthly costs to hold the property.
About the option deposit, you should be asking between 2 %-3% of FMV, which in this case is approx 5k.
About rent credits, are you sure that you want to give that much rent credit /month? That amount could run you into trouble if you have to evict the tenant. If I were you, i'd reduce the rent credit to about $100/month if any at all.
Quote:
On 2003-12-18 15:37, johnqreplies wrote:
Please help me understand how I can turn this opportunity into cash.
I found a L/O on a home with a FMV of $175k.
My purchase price is $170,000.
I can lease it for $1000/mo with $500 per month going to down payment. The initial option consideration is $2000.
Can I flip this to another buyer, or are the numbers too tight?
Thanks for any help...
Hi everyone,
Remember no money goes
toward d/payment it is credit to the pur-
prise.Some l/comp.will use toward d/p
but your better just to reduce p/price with
r/payments and option money.
johnqreplies,
to be honest it sound like your not talking to a motivated seller. Don't do a deal to bust your cherry. Always make your profit when you buy.....
What you are saying is he will give you a 3% discount on the price. what if the market levels off as interest rates go up? what if your t/b moves out and you have to hold it a month or 2? what if the t/b trashes it? You can't really discount the price to sell quick.
But I would suggest taking the RC out get a price around 155k for 3-5yrs and that just over 10% off the FMV
Best of luck however you decide...
[addsig]