What's your creative way to sell this house?

Question

We have a potential tenant interested in buying one of our rental properties. We've got about $40k in it and have owned it for about 10 months. Rents for $800/month. "IF" we sold it, it would have to be for at least $69k.
I'd like to hear some creative ways to structure a deal with the potential buyer. They can come up with $4k now or $7k in 60 days for a downpayment. They can NOT get traditional financing, so us financing would be the only way for them to purchase a home.
We have not yet discussed purchase price. What's the best long term play here?

Thanks in advance!

Account Closed · Answer

With a Lease Option you still own it (until he exercises the option) so you get the tax write offs, the depreciation, the principal pay down and no capital gains until it's actually sold. If it falls out of Lease Option (fails) then you can either adjust the sales price or offer it to another buyer and get another option fee. I make my LO's for 3 to 5 years to give the person time to qualify and sometimes they never exercise the option, move to another state (life changes) and I sell it on Lease Option again.

Just make sure the Lease is one agreement and the option is a different agreement to comply with Dodd-Frank which is simple enough to do.

Account Closed · Answer

With 10% down and 12% interest I'd do that deal with him. You are better off using a Lease Option than using a mortgage. If he defaults with a Lease Option you can evict, if he defaults with a mortgage you have to foreclose. It's a huge difference.

Jeff Cantrell · Answer

@Mike S. That’s a great point.  Other than the eviction verses foreclosure, what are the other pros and cons of each route?

Jeff Cantrell · Answer

I’m thinking about doing seller financing for him at 12% for two years to let him build/fix his credit and then helping him refinance with a bank and me cash out.

We’d make around 16k in interest over the two years and and he’d be making a payment that’s $100 lower than rent and building credit at the same time. Win win.  We’d profit approx $25k at when we cashed out and then could 1031 that into another property.

Something I could add to this to make it better?

We’ve never sold anything before so this is unfamiliar territory.