I'm fairly new to real estate, and after educating myself here on B.P. I realize that I made a mistake on my first rental property. Let me be brief on my first property I bought about two years ago: I bought a 2 bed 1 bath duplex in a neighborhood that has a lot of vacancy and low rents( I found out about this after I bought the property, again not studying my market) for 95k with a conventional loan at 4.12% interest with a 25% down payment for 30 years PITI is $540 a month. I currently have one side rented for $525 and the other side vacant at the moment. There are some vacant duplexes around me for $395-500 so mine is slightly above the rest. The tenant that I currently have has been living there long term over 3 years. As you guys can see I don't cash flow at all in this property. I'm having trouble renting the other side since the rents are so low in this neighborhood if I drop the rent to 400 like the rest the numbers still don't work and if my other tenant finds out the other side is paying 400 I don't know how he would react( big hassle). My first question is does anyone see any solutions here? My second question is my current tenant asked me If I would be interested in rent to own. Is that even possible with this property. I would really like to find a solution to move on to next deal. This property has been a great learning experience for me as I'm the one managing it and learned a great deal of being a landlord.
Yes, a lease option will work. They will hold the first right of purchase (option) on the entire duplex, but the lease agreement will only be for their side. MAKE SURE THEY PUT MONEY DOWN TO SECURE THE OPTION, otherwise they won't be serious. Lastly, there is one big decision to make: allow them to sublease, and they will collect rent and manage the other side (can be fraught with problems), or don't allow them to sublease and you still have to manage the other tenants until they execute on their first right of purchase.
@Casey Carroll Thanks for reply. When you do a rent to own who is responsible for the maintenance of the property? Thank you.
The tenant-buyer is, always. Responsible for all maintenance and repairs, and they agree to take the property in "as-is" condition, so if they'd like to do an inspection, they need to do it before they sign papers with you.
@Casey Carroll Thank you for your advice. I will look into it.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing