I'm a new hopeful investor just starting out in Kansas City. My original plan was to start out with wholesaling and eventually work into buy-hold rental properties. Well, I came across a guy working at the local hardware store last weekend. He mentioned he has a property he's trying to sell but doesn't want to take a big hit like he'd have to to sell to an investor. Just this afternoon the idea hit me to maybe try picking up his property subject-to and doing a lease-option on the back end to offload it and get some cash flow out of the deal. I don't have any specifics on the property yet but will try to catch up with the guy again to see what he might be open to, as well as getting the property address to perform my due-diligence regarding values in the area and rental rates. Any pointers on other things I need to look at? This would have to be a no-cash-out-of-my-pocket kind of deal as I've got no extra funds right now to put toward the deal.
I like how you're thinking creatively to put a deal together. It all comes down to numbers of course but any time you can do a deal with none of your own money upfront it's a good start. The main thing you need to see is what the spread is between the debt service on the subject to mortgage and the rent you can get on a lease option. If there's enough spread after all of your operating expenses and debt service, it could be a good deal. Make sure that you still have positive cash flow. There is huge demand for rent to own so I don't think you'd have any problem getting a lease option tenant.
Good luck on it.
Well...I did an online search and pulled the most current deed to the property. Looks like the guy (my potential seller) executed a Warranty Deed to someone back in '09. Guess that deal isn't gonna work. :)