Newbie with a Lease Purchase Scenario

4 Replies

I'm wondering if the group here would see this as an opportunity, a loser, or a break-even headache.

Subject property is highly updated (electrical, central AC, etc.) 1928 build wood frame home in an undeniably up-and-coming neighborhood, currently retails in the $130k range.

Currently rented to mutual friend for $1100 month

Current owner is offering me a Lease Purchase agreement and is committed to structuring deal in such a way where there is no profit, but rather a break-even exit strategy whereby they do not have to deal with maintence, management, etc. Balanced owed on their mortgage is around $155k.

Terms have not been discussed beyond stating that ALL $ paid within the agreement would go toward purchase price (as opposed to whatever portion is typical).

My experience is limited: I've flipped a few houses and currently co-own and manage two rentals.

My financial: currently live in a condo (reo purchase) which holds %50 equity and have a private undocumented high interest loan on that. Mid-to-low credit score and very little personal income. Included this to show that I could view it simply as a way to purchase a personal residence where I could not "conventionally." I'm not in LOVE with the subject property but could be happy living there. But would rather it make sense more as investment first, with residing there being a secondary option.

Many thanks for any input.

If I'm understanding you correctly, your considering getting into a lease-to-own agreement. If you're looking to work on improving your credit and then purchasing the property that's one thing, but as an investment property, which it sounds like you would like it to be, I don't think it's a good move. Lease to own properties are designed to help buyers with bad credit move into a home immediately while being able to work to improve their credit while renting the first year or so. Eventually, when the credit is improved they would apply for a mortgage in order to purchase the property. They are not really designed as investment property. Good Luck!

Understood, and I thank you for this feedback. It seems like it probably is not the right move for me to become involved in this deal. It is an opportunity that found me as opposed to the other way around.

I guess I'm having trouble getting away from thinking of it as if it's a "free rental". . . but with no spread btw loan balance and value it just doesn't come out.

Being new to the business and without the funds to chase down more of my own deals this jumped out at me, briefly.

Thanks again for the feedback.

Wow man...checked out some of your vids / intel Brian G...very glad I did.

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