I put a offer in on a home and it came back that its about to go to short sale so I contacted the home owner and found out that she is 5,000 behind on payments and just wants to get out from it I told her that I can do a lease option with her to save her credit and even for her to make some money in the process I just need some of your guys wisdom to make sure I approached this the right way before I move forward on it thank you DG family
Tyler
Who is Dean Graziosi?
Are People Actually Successful?
Does Dean Practice What He Preaches?
What Deals Are The Students Doing Right Now?
Tyler
if the homeowner just wants to get out of the property, and does not ask for any money, you shouldn't offer any money; especially if you haven't done the calculations yet, and don't have a tenant buyer in place...
If you've never done a Lease Option I would suggest that you partner with an investor who is an expert on L/Os (like Kareng) because you want to make sure that your numbers are right with regards to the mortgage payments and credits, and that the deal is indeed feasible and profitable.
Valerie
Tyler
First of all, you have no info on your bio showing where you are located. This is extremely important because some states have different laws regarding LO.
Are you familiar with structuring LOs?
If they are doing a SS, she is obviously upside down. And then being behind in her payments, I am not seeing how you will be able to get her any money. And it will need to be structured for YOU to be able to make money. Also, there would be a lot of other questions that would need to be answered to see if this house would even be a potential candidate. Not all of them are.
Karen
Thank you guys
Thank you for the feed back I have some info on the home its a crazy story its not going to be a SS the listing relator just wanted more money and tried to counter saying that to the relator I was using to put the offer in with.
2012 taxes has it at 99,000
she owes 49,000 behind 5,000 for total of 54,000
rehab is 10,000
so I figured I could L/O it once the 5,000 is paid to catch up the late payments put the 10,000 into rehab and put another buyer in there and do a L/O with the new buyers does that seem like it would work?
Tyler
You cannot use the tax assessment for your comps. You have to use actual "SOLD"s for comps.
Then, are you planning to use your own money to catch up the loan and do the rehab? DO NOT catch up ANYTHING until you have done all your due diligence and have the PROPER contracts in place! Because they certainly will NOT give it back to you!
There is a lot more to this. You need to get an Authorization to Release Information form signed by her for the bank to give you info on the loan. You will need to contact the bank to find out if she has a fixed rate loan, exact amt of pmts, does it include PITI and EXACTLY how much it will take to catch her up. There will be fees in addition to her late pmts. Have they referred it to a lawyer yet? If so, there will be lawyer fees.
What are the rental rates for equivalent properties? Rent credits, etc, etc.
If this is your first deal, you may need to partner with someone to guide you thru it. Not an easy peasy first deal.
But there definitely is a possibility to make a good profit.
Karen
Thank you Karen
Yes this is my first that's why I'm hoping for the best on this one I have two buyers lined up on this property so I believed its was good I figured it would not be an easy one just takes knowledge to understand the process and since this is my first deal its a little challenging. the rent is not bad
Her payments are 647.00 a month everything included insurance etc.
rent for this area of this home would be 1,000
section 8 housing will pay 1,100 in rent
comps show that ARV is 101,000
they have not brought a lawyer into it yet I did ask about that
Thank you Karen for taking time to point out what I should be looking for
Tyler
The advisory line said the
The advisory line said the only contract form I would need is the agreement to lease with option to purchrase and that would cover it
Two contracts
It is VERY IMPORTANT to use TWO SEPARATE contracts.
You need to have your Option to Purchase contract, yes, but you also MUST have a totally separate Lease Contract. This is for your own protection!
If your Tenant/Buyer stops paying for any reason, by having the separate Lease Agreement you can just evict them vs having to foreclose, which is much more expensive and will take much longer!
Also, be sure in the Lease agreement that NO mention of the Option to Purchase is made.
Karen
I sent you a PM Karen
I think I'm putting to much thought into it and its confusing me and making my head spin because I look at all the numbers and they make sense then I get to the process of the L/O and the 5,000 she owes that gets me because she needs to get that caught up first before she can do any agreements