What is the best way to expedite this deal?

Question

I am working with a client who inherited a free and clear beach front condo in Palm Beach Florida. I am about to put the property under contract but here's the catch....Once this property is purchased by an investor, my client is looking to pursue 2 year lease option contract on the subject property. My concern is that if an investor agrees to a lease option after the purchase he will disclose the price I assigned it for. What would be the best way to expedite this deal allowing me to make a profit and still keep a good relationship with all parties involved. Any advise would be greatly appreciated.

Thanks in advance.

Account Closed · Answer

We are investors to make a profit it is best to disclose everything if asked, if you have a contract with a seller the buyer cannot surpass you to get to the seller. If someone is unhappy that you are going to make a profit move on to the next buyer.

The buyer doing a lease option will probably have credit problems so let them know the benefits of doing the lease option and the price they are paying will not be till the end of the contract period.

Moises G. · Answer

Thank you all for your excellent feedback. Unfortunately, we could not find an end buyer due to some recent sales that dropped the subject property substantially.

Brad Gertz · Answer

Every deal that I do they have a good idea of what I am making and if they ask, I will tell them. They are going to see the HUD anyway and my buyers know that I am making a profit and they know that I am fair. If they like the deal then it shouldn't matter what you are making!

Dan Koch · Answer

Why does it matter if the current owner finds out you made a profit??? If he thinks you're a Non-for profit or that you are simply out there working for free then that is his own problem.

You are helping him, by getting him cashed out and finding somebody that will purchase and then lease back to him.  That is pretty good deal in my book for him.

I bet there are a ton of investors out there who would tell him "yes I'll lease it back to you" and then just wholesale it to some other investor who would have no intention of ever allowing the guy to do a lease option!!!

Your end buyer knows you are a wholesaler so that is fine. You say in your post that your plan is to assign the contract, so I am assuming you are planning on making 15k or less on the deal yourself.

If the seller of the house is just a hot lead and not a client of any other business you may have, then you will probably never buy a house from him again. Make your profit, do him a favor and line up an end buyer who is willing to do the lease option, and move on.

Jon Holdman · Answer

If you're making a reasonable profit, say 5-10% of the selling price, be upfront with everyone.  This seller is going to find out no matter what.  The end buyer is going to option it back to the seller at a price that's higher than what they paid.  So, you're taking a profit, the end buyer is taking a profit and the seller's going to see that price.

Sale/leaseback with option to repurchase are just plain bad ideas.  These can be turned into equitable mortgages if you try to evict.  This seller really just needs to get a loan or heloc on the property. I'm guessing that's a problem.  He's going to get paid some amount (the price you and he agree to), then rent it for some rent amount, and eventually buy it back at a higher price from the end buyer.  That could easily be constructed as a loan of your purchase price, with payments equal to the rent and a balloon payment equal to the repurchase price.  If you do the math, I suspect you'll be in usury territory.  Your end buyer will be in a world of trouble.

The seller would almost certainly be better off with some sort of loan, even a high rate hard money loan.

Not saying you won't find a end buyer for a deal like this, but this is not a good deal.