Lease Option on a fixer upper

2 Replies

I'm new to BP, looking for some advice. I am a contractor, and I've had a property fall into my lap. A gentleman from out of state wants to sell his successful rental but it needs a lot of work. I want to set up a L/O and he is interested but wants a proposal. Any ideas on the best way I can set it up to come out ahead, I would like to do work on the house as part of my rent, the term would be two years and I am confident I will buy in the end. The only reason I don't buy it now is I have only been self employed for a year and cannot qualify for a mortgage.

@Brandon Mason

Welcome to BP!

Questions...

  • What is the existing financing?  Amount to pay off, payment, type - govt or non govt, arm or fixed
  • What is market rent?
  • Is it habitable now, meaning rentable?  Can't legally rent an un habitable house.

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You can do a JV, 

ARV - resales costs - re hab costs - private lender interest - your JV profit say 10%

= note for seller

No payments on note until resale (moratorium)

Say ARV = $200,

- $20K in resales costs - $20,000 rehab costs - $2K private lender interest - $10K in JV profit to you = $148K note to Seller, moratorium for 4 months

You buy it, own it, fix it, list it, sell it, pay the costs to sell, pay seller, pay private lender, make $10K for putting the solution together.

Thanks for the reply, the property is habitable, I would be providing labor for tasks such as roof replacement, drywall repairs, new texture paint and some updating on trim, and landscaping ect. Unfortunately we having barely gotten into talks on this deal and I don't know the condition of the loan yet. He is flying in to meet me in a few weeks. Marketable rent is $1200 it is near a college, 3 bed 2 bath 1200 sq feet up and full unfinished basement 1200 sq feet downstairs. I'm looking for a place to live right now because we have had housing provided by my wife's work but we have our third child on the way and she is no longer gonna be working. So I thought this might be a good way to get into a house at a decent price that I can build some sweat equity in and keep it as a future rental. It could easy be a 5 bed 3 bath after i purchased it. He wants $130,000 after the rehabs and my real estate agent believes with a little shining she could get $130,000 as it sits. 

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