Realtor · Florida / Atlanta · Member since 2015 · 210 posts · 53 votes
Hello BP,
I found a home that I want to purchase and live in but as a real estate agent I write off so much that my income is really low right now. In the next few years I will change this so for now I want to lease purchase this home and rent out the spare rooms to pay the mortgage. The home needs work however; parts of the foundation block are crumbling and the bathroom needs a full remodel. Is there anyway to just get a renovation loan to add to the mortgage that will allow me to upgrade the home?
@Anton Watt a lease option doesn't give you full title, it does however give you interest in the property in which yes as long as the contract contains correct verbiage you would be able to renovate home. The risk in doing this would be if you throw all your money into a home someone else has title to and breach your lease agreement you basically just fixed their house for free. There may be grants you can use towards property repairs depends on the home. Make sure you have your end in mind as far as how you will payoff what you owe after option time is up or just go the route of seller financing to gain title while seller carries note.
What would seller financing look like in this situation?
Originally posted by @Jamaal Johnson: @Anton Watt a lease option doesn't give you full title, it does however give you interest in the property in which yes as long as the contract contains correct verbiage you would be able to renovate home. The risk in doing this would be if you throw all your money into a home someone else has title to and breach your lease agreement you basically just fixed their house for free. There may be grants you can use towards property repairs depends on the home. Make sure you have your end in mind as far as how you will payoff what you owe after option time is up or just go the route of seller financing to gain title while seller carries note.
@Anton Watt an example can he as such:
Purchase Price:80k on 15 year amortization @ 5% with downpayments of 5k. Seller would carry remaining 75k back on a note.
Rehab:20k
After Repair Value: 125k
You can live in it for a few years and turn around and resell it and pocket all proceeds tax free or just hold the home and rent at that point. the choice is yours. Title is power, lease options are good too though if you have a different end game such as assigning options etc.
Ok so basically I can contract the home for 80K and put 5K or so down. Pay her mortgage and pay the property off over time. Per the contract I can also get my name on title?
Originally posted by @Jamaal Johnson: @Anton Watt an example can he as such:
Purchase Price:80k on 15 year amortization @ 5% with downpayments of 5k. Seller would carry remaining 75k back on a note.
Rehab:20k
After Repair Value: 125k
You can live in it for a few years and turn around and resell it and pocket all proceeds tax free or just hold the home and rent at that point. the choice is yours. Title is power, lease options are good too though if you have a different end game such as assigning options etc.
Seller financing works best if house is free and clear. There is always risk of acceleration being initiated from the lender but usually as long as you are making payments on time they don't care. Obtain written authorization to work with the lender to make payments and to obtain payoff quote for whenever you decide to refi down the road. Definitely work with an attorney if you are unsure of your ability to follow through with a deal like this.
Thank you for your help here. It looks like I will just have to sell this one rather than take it down myself. Everything is still up in the air but a few people have presented offers to me and more are still coming in as we speak. Thank you all for your great advice. I really appreciate it!
ANY work you do on the house has to be approved in writing by the owner of the property. If you have a contractor do work on the house and you don't have the money to pay them, they can then lien the property, and the property owner is then liable for the debt. It's very unlikely contractors are going to do work on a house where they have no lien rights, unless it's paid for upfront. As to loans, it would be a personal loan, as you can't mortgage the property.
FHA has loans that include renovation I believe. You may also be able to qualify for first time homebuyers down payment assistance, etc.
Thank you so much for that advice. It looks like I'm likely going to sell this home off rather than take it down. WE will see how it plays out. I am working both angles right now.
ANY work you do on the house has to be approved in writing by the owner of the property. If you have a contractor do work on the house and you don't have the money to pay them, they can then lien the property, and the property owner is then liable for the debt. It's very unlikely contractors are going to do work on a house where they have no lien rights, unless it's paid for upfront. As to loans, it would be a personal loan, as you can't mortgage the property.
FHA has loans that include renovation I believe. You may also be able to qualify for first time homebuyers down payment assistance, etc.