My Landlord is offering a purchase option

[Cara Lethco]

I am new to investing (we have a fixer upper house and mobile home we just closed on). I own a tattoo business in Knoxville TN, and my landlord just offered to sell me the building and the small 2bd 1ba rental house next door to the tattoo studio. He doesn’t plan to list them and is only looking to cash in on these properties to further develop another property he has. He is offering a purchase option of 10k that will go toward the purchase price of I buy the property. I would have three years to purchase. Also he is going to put half the rents of both properties toward the purchase price and continue to handle all repairs until I purchase them. I do believe I can put myself into a position to buy in three years but he’s pretty much asking retail for the properties... there is more developments coming my way and the main road I’m on is being expanded to have a turn lane. Our hands are tied because we just poured our capital into the two properties we just bought... should we unload one of the properties for this opportunity? Im just wondering if taking this offer is going to give me leverage in the long run since it isn’t really a deal right now. 

[Michael Ablan]

Do the properties you just purchased make you any cash flow?

How much cash flow can you generate on this deal?  

If you're buy in is only $10k, then maybe grab a personal loan and offset the payment with the cashflow from the deal.  It sounds like you could come into some nice appreciation on this deal (but never bank on that).

I agree @Dennis M.  See if you can work a land contract first.  Get it into your name if you can.  It gives you more options at the end of the 3 year mark if you need more time get financing.  A lease option can be nullified pretty easily depending on the wording.

Last thing, make sure you do this deal through an attorney if you decide to follow through.  You'll be glad you did if things get rocky down the road.