Is this a deal to pursue?

10 Replies

Hey everyone, so I need your perspective. I went out To look at my first property and the sellers said they may be interested in a lease option ... They are very motivated and don't want to  be landlords anymore...so I'm wondering if this is worth pursuing ... Here is info that I have 

Existing Mortgages 207K

Current comps 245k

Cosmetic rehab needed to be rent ready 5-10k

Mortgage payment $1450

Monthly rental $1750

The house is a split level and has a full kitchen downstairs as well.. Close to a navy base... In a great neighborhood.   

The mortgage is to high for this to be a positive cash flowing rental.

Option one is to look at turning property into a duplex and getting twice the rent.

Lease with option the property and then rent out each apartment

Get as long of a lease as possible with the seller

If you can't turn the property into a duplex, advertise as an Inlaw addition, which are very rare as rentals

Lastly think about renting out the rooms to increase cash flow

Does  that mortgage payment include  Piti? Is your rent to them $1450 or what you can rent it for? How long is the option period. Are you setting a purchase price now? If so, how much. In other words, I would need more info to give an intelligent answer.

Thanks

Also think about owner financing

a. wrap - create a new mortgage but low interest

b. sub2 and a note for equity

Learn about the Due on Sale Clause

The payment is to high.

If you buy this and refinance for 360 months at 5%, even with financing 100%, your payment drops to $1,111.22.  I would see if I could get bank financing for 75% then get creative to finance the balance.

Hey @Brian Gibbons .. Those are some great ideas and I thought about making it a [email protected] Stein , the $1450 would be the total monthly payment, and the $1750 is what the seller has been renting it for. I was thinks about a sandwich lease, this may be too much for me to take on on a first deal, but I thought I would check ... 

@Kevin Carbon  I'm guessing the P&I alone is around $1150-$1200ish? If so, and if instalment sales are viable in your state you should be able to easily sell this on a wrap for $269k at 6% giving you $1600/month (P&I) for $400+ passive cash flow. Plenty of buyers would jump at the chance to get in with a smaller down payment and the opportunity to fix the place up the way they want it.

Personally I would MUCH rather do that than rent it, even as a duplex.

@Doug Pretorius  , I agree, I will have to look into a wrap in our state.. 

@Rick Stein  ... The sellers told me the total payment is $1450.. And they have been renting it for $1750..

@Brian Gibbons  ... Those are some great ideas and I will look into them.

They have called me back and want to meet to discuss going foreward... The husband is familiar with lease options as his Dad bought his house that way....

Also I thought I had tagged you, but I must have done something wrong ....I appreciate all your help:)

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