I have never done a lease option or fancy seller finance in the past. The only seller finance I have gone through is that seller is lending me 10-15% toward my down payment.
Fortunately, I met a local guy who is retiring and would like to transition to focus more on private lending. He has been hinting to me that he is willing to go through a lease option with me. FYI: he holds a few properties.
The building he is offering to me is a 3-Units apartment. Each unit rents about $750-$800 in average. He is asking for $70k per unit.
I would like to get your opinion on lease option strategy specifically. If you can through down any additional fancy seller finance strategy as well that would be great.
1) Entering criteria is that I would like to get in with as little money as possible.
2) I want to have a clear exit strategy 3-5 years down the road when the lease option is expired.
3) While holding during the lease option period, I would like to have a positive cash flow to sustain the maintenance and getting paid as I am managing or paying my personnel to oversee it.
Your counseling will be highly appreciate.
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A tri-plex? Don't think so, townhome perhaps, check the legal description, also check common wall agreements and agreements filed for amenities.
The way I have structured my RTO deals where I am the buyer is I just cover the sellers costs (financing, insurance, taxes). And I don't give him any up front deposit or option fee. I don't accumulate any credits that way but I make sure I position it so I can buy at current market prices but take advantage of the future market value. But this will depend on how motivated the seller is, which by the way is my first criteria when doing any real estate transaction. If the seller is not motivated then I know the deal won't be good enough for me.
All you have to do i figure out what his costs are and offer him that s monthly payments. At least it's a starting point for the negotiation. And keep reminding him that you have to make money. I would say you should be looking at least a $600 spread per month based on the price and the monthly rents.
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