Residential Real Estate Agent · Saratoga, CA · Member since 2009 · 71 posts · 9 votes
I am thinking about buying a property which is leased-to-own for the term of 6 years. The numbers look like this:
Purchase price : $15k
Rents: $450/mo after taxes & insurance
At the end of 6 years the tenant owns the house free & clear and I have received a 20% ROI.
Does anyone think this is a good deal? It does not feel right, because I won't own the house after the 6 yrs term.
Thanks for your help, Rolly
Real Estate Investor · Tampa, FL · Member since 2008 · 456 posts · 42 votes
17y
Originally posted by Rolly Dupree:
Hi Karen,
Thanks for your response, but it would be $3000 per year for 6 yrs. so $18K. Do you still think it's a bad deal?
Thanks
No, I'd say more than doubling your money in 6 years is not a bad deal but your original statement said "at the end of 6 years." What difference does it make if you own the property in the end if the ROI is good? I would have an attorney review the contracts and make sure my position is protected from both the original owner and the tenant/buyer though.
Investor · Kalamazoo, MI · Member since 2009 · 1k+ posts · 495 votes
17y
Lease options can be tricky if the buyers files bankrupcy. The court could say you have an un-recorded lein and try to take the property for the benefit of the buyers creditors. It would probably cost about $10k to try to defend in Federal Court and with such a small amount invested would most likely not be worth trying to defend on your end. I would check with your lawyer and see what he thinks would happen in this situation. I personally would not buy a lease option contract/note for this reason.