the house is a 3/2 all brick house on a 1/2 acre lot with a fenced in back yard. I have the ARV at 103,000. The market rent is 940/month. The guy didn't like my all cash offer of 45,000. He wants 65,000 for it. I asked him how much he would want per month if I made payments. He said 600 a month. I think I can get away with 700 per month and make 100/month.
I then spoke to an potential tenant buyer with 3,000 saved up for a down payment. They pay 1200 a month now. I'd also sell it in the option for 75,000.
I have the lease option contract I found in the files area. My next move is to come back to him on Monday with the lease option. I know I have to have one to him and one to the buyer but how do I structure that and is this a good deal?
You are looking at a sandwich lease option
Enter into a lease and option with the seller, with rights to sublease and sub option, get as long as a lease as possible (2 year lease with possible 5 12 month extensions)
Advertise for the tenant buyer and do a 1003 mortg app, have a mortgage broker look at the app. Look for 43% DTI.
Make sure you have reserves in case the TBer defaults.
I really like to not do a mortgage.
I like your ideas Brian. I find that many of the lease options fall through and the owner ends up with the property again.
Great find, @Mike Watkins is suggesting with the 1003, mortgage broker, and DTI is to prequalify your lease option buyer so that you feel comfortable that they are able to make the monthly rent and close on the property within the 2 years (or 3-5 years) or can fix whatever issues they have that's preventing them from buying now so that they can close within the terms of their option. I would advertise the house for sale as he also suggests so you can have a list of buyers and take your pick from them.
I would do this deal as follows.
Buy with a lease option it for $65,000 and $600 a month with a 5 year option term, minimum 3 years, rights to sublease, etc.
Is it in need of a lot of repairs? How much in repairs. If not, or not much needed, then I'd advertise it for sale for $110k price. I would NOT take less than market rent. That's monthly cash flow! $3k for up front is good enough for me if I don't have much closing costs to pay for.
Do you have an attorney that will help you with the contracts and closings? I suggest getting one.
it needs a new drive way. And carpet.
I have an attorney.