Lease-Purchase: Becomeing a 2nd Hand Lender
Lease Purchase Example- $100K Home w/ 10% down.
I'd like to work close witht lenders and have them refer me there "top reject" prospects. Ones that have the financial credibility, but are just short on their credit scores. I would like them to choose their own house that I will purchase and hold for them. (Giving them a reason to pay a premium rent.)
Assuming they are looking for an FHA, I'd like to take a 3.5% deposit up front. This will go to their down payment on the back end. It will also cover most of the closing cost if the deal falls through and I need to dump the property, preferable to a wholesaler where I can avoid real estate costs. The purchase price of the house will be negotiated to cover closing costs. As my girlfriend is an agent, we will roll her 3% commission into the down payment. Giving me an extra 3% equity off the top and reducing my necessary cash to $7,000.
I will rent the property to them at 11% of the selling price for as long as they need. The best candidate should be able to qualify to purchase within a year. Because this house will eventually become the tenants, all maintenance cost will be pushed onto the tenant. I believe this is called a triple net lease? (needs more research). For a $100k house I would be looking at a $350 cash flow. Plus approximately $140 in equity being built each month.
The contract will have an agreed upon appreciation value built in, appraisal allowing. Say 2%, providing an extra $2,000 upon closing.
Assuming the buyer pays closing cost on the back end and no agents are used, my numbers are as follows:
Final Equity- $11,700
Cash Profit-$4,200
Appreciation- $2,000
Initial Investment- ($7,000)
Final Profit- $10,900
Is this possible or am I missing something?