OfflineWell yesterday I picked up my second sandwich deal. I found this deal about a month ago. This house was on the market for a little while and a friend who knew what I was doing told me about it and the story behind it so I told him I was interested and to give the owner my #. The house was expiring with the agent on may 31st so I told my friend I didn't want to deal with the agent so have the owner call me after the contract has expired. The house was on the market for $214k and it was worth around $190 so I wasn't worried it would get picked up. So 2 days ago the owner called me and I went to look at the house and then went home to run some #'s. I called the owner but had to leave a message and he didn't call back until yesterday. We worked out a deal over the phone and I went and wrote up the contract right after getting off the phone. So here it is. He paid $180k cash for it in sept 09' and put $10k into it. He bought it for him and his wife but after buying it and moving into it they realized the floors were to hard for his wife. It's only tile in the kitchen and wood in the hall but she is up there in age so it just didn't work for her so they moved back to their other house and just wanted to get their money back. I offered $188k with a lease option and the right to sublet and they excepted. I don't know if I am going to do a 1,2,or 3 year lease. I am really considering a 3yr so my #'s are for a 3yr but who can just change the them around for each lease to see my potential profits.The option is a little high but the rest I believe justifies it and the t/bs will be paying it anyway. I believe this is a pretty sweet deal but dg family you tell me what you think.
4br 2ba house. I will have pictures on my free dg site soon. It's www.realtysolutions101.com
3yr lease option and right to assign/sub-let.
Purchase: $188k
Option Payment: $5k to be credited to purchase price
Rent: $1k
Rent Credit: 50% or $500 per month
T/B
3yr lease option
Purchase: $215k
Option Payment; $5k
Rent: $1,300 to $1,400
Rent Credit: $100
My profits:
Rent credit from owner: $500x12mnthsx3yrs= $18k
New purchase price for me $188k-$18k=$170k
$170k-$215k(t/bs purchase price)= $45k!!
But wait there is more! There is the rent which I will use the $1,400 in this example and will hopefully get that but $1,300 easily. There is a $100(rc) at time of purchase which is part of the overall profits and has already been added to the equation but THEN there is the other $300 so it would be $1,400-$100=$1,300 left. $1000 goes to my rent and that leaves an additional $300 a month to me as a bonus profit! That adds up to $300x12x3=$10,800!!! So my total profit will be $45k+10,800= $55,800!!!!!! Oh and one more bonus I don't have to make a payment until august 1st!
So if I can get someone in there now I could possibly pocket an extra $2k before having to make a payment! I did this with none of my own money! Well actually I paid $1 as consideration to make the contract legal. So what do you guys think? Sweet deal or not?
Kevin
Numbers don't lie. You run the numbers, you got the result. Congratulations. I have one question on Lease Option, what about the equity of the house after 3 years if the FMV goes up, who will benefit, you or the owner? I have no experience on the lease option yet. Thanks. Blessings to all. LA
Everytime you repeat the words "I CAN DO IT" with conviction, you cancel or override your fear and increase your confidence. By repeating this affirmation over and over, you can eventually build your courage and confidence to the point where you are unafraid. -Brian Tracy-
Kevin,
Wow. I really have to learn how to make sandwiches like you.
this deal is sweet providing you get your 3 years lease option from a t/b and the owners except it as well.
I am really thinking about going towards the lease option deal since I don't have any money to invest.
looking forward to hearing more info on this deal.
One questions though. How did you get the owner to a agree to a no payment till august 1st! Was there something in it for them? or they are just nice people that wanted to help you out.
Stan
"Be the change you wish to see in the world" Ghandi
Tracy I benefit and the t/b benefits when the house goes up. I benefit because I know the house will be worth at least $215k which I am selling it at the t/b benefits if the fmv goes above that. I will be making a good profit so I am leaving some for the t/b. If the t/b doesn't buy then I will can buy myself then resell, rent, lease whatever I want or I can assign it to another buyer but I will be buying it because of the equity I am creating.
Stan the owners already know I am renting it out. I let them know up front of my intention is to place a renter in the house but now I guarantee the agreed upon rent between us will be paid and up to $100 a month or repairs I will pay for (which the t/b will be paying). They know I am starting a business and I am an investor and I am in business to make money not lose it. They first wanted $10k op and I told them I usually don't go above $3k because they are not financing the deal I am basically renting it until I buy. So he countered with $5k op. We talked earlier about how some tenants are bad and I told him I have a system to put really good tenants in so I just asked to have the payments and the OP start on Aug 1st so I have time to market and put a good tenant in the house and since they owned the house free and clear they agreed happily. You never know until you ask! I also forgot to add there is a hot tub that came with the property and by taking it I will not increase or decrease the value so I am either going to leave it for the t/bs for an extra $1k on the OP or take it and sell it for $1,500. I hope this makes sense I am pretty tired I have been at a graduation all night. If it's not to clear let me know and I will explain it a little better.
Good Luck out there dg family
Take Care
Kevin
I'm learning so much from studying other's deals! This site is fantastic. I was waiting for you to post this new deal! Thanks for all of your advice again!!
Sheila
"If God is for us, who can ever be against us?" Romans 8:31 NLT
Kevin,
one last question. The option payment. ( Option Payment: $5k to be credited purchase price )
When is that made? is it after the lease option is up or before everything even get started?
After that I think I am clear on everything. I read the post like 5 times just to make sure it sticks in.
Thanks
Stan
"Be the change you wish to see in the world" Ghandi
Stan the option payment will be due on Aug 1st as well which I will be asking for from the t/b so really they end up paying the op not me. I paid $1
as consideration and got the contract to sub-let the property. When I buy the op will be credited towards the purchase price on my end as well as the t/b's end. On my end it will be subtracted from $188k-5k=$183k and on the t/b's end from $215k-5k=210k. Keeping my profits the same at $27k for that part of the equation.
You are very welcome Sheila I hope I helped a little with the very limited knowledge I have.
If there is any other questions I am happy to answer them.
Kevin