I have finally found a motivated Seller and a motivated TB. I am scared to death :helpand don’t know how to structure the deal. Here is the deal: House is free and clear… seller wants $950 for rent and to sell in 2-3years for 125K, property is valued at 112k right now. Property is located near water so it could appraise for more than 125k in 2-3 years. But I dont know for sure… I have a TB that is will to Lease option the property and put down 20% and pay $1000 rent bc they really want the house. I need some help in putting this on paper, so do I do a SLO or a CA or what other option? and how step by step do I it?And could I get a part of the 20% the TB wants to put down and part of the $1000 rent TB is willing to pay? Any feed back is much appreciated!! I really dont want to screw this up. Thanks, Newbie
There’s no way I would do a SLO on this deal, as there’s virtually no spread
or reason for you to stay in the middle of this deal.
Why would the seller want $125k if it only appraises for $112k?
How is anyone going to know it will appraise for $125k in 2-3 years?
Just because it’s near water isn’t going to make it do so.
You would have to increase the sales price above $125k if
the seller is wanting to net $125k in 2-3 years. Given that the T/B
has $25k to put down, you would have to set the sales price @ a
minimum of $150k. If you’re going to offer rent credits, then you’ll have
to further increase the sales price.
Do you honestly think you could do this with this house, in this area?
I’m only asking because I don’t know your area.
I would structure this as a CA, but the seller may have to come
down a little with the asking price. Do you have any comps for the area?
I’m not trying to talk you out of it…it’s definitely a doable deal.
Also, do you have any paperwork? There’s more to it, but here are the super basics
of doing this deal:
Sign the deal up as a Lease Option with you as the Tenant/Buyer.
Market for a T/B.
Assign the deal to the T/B, collecting your profit from the option consideration.
I’m not entering any dollar amounts using the numbers you gave. If you try to market
and sell this $112k house for $150k +, then you might not have much luck, as you’d
be pricing everyone out of a potential deal.
And, yes, Michael’s site is a good place to hang out.
Thank you for the good advice. I spoke to the seller and he is willing to sell for 100k with 3% down as option money from the TB. I want to be sure I’m doing this deal the best possible way. So here goes… I will sign up the seller with a LO for 100k then assign it for 106k with 6% option money down from the TB. Seller get 3% I get 3%, what do you think about this? Thanks for all the great advice, Im learning every day!
Sign the deal up as a lease option (1 page).
You’re the tenant on the lease and the optionee on the option.
Total purchase price $106k
Market for a T/B.
I will sign up the seller with a LO for 100k then assign it for 106k with 6% option money down from the TB
You assign the agreements you have with the seller to the T/B, not for $106k, but rather, $6k (which is the option consideration amount). Make sure you have an assignment agreement, stipulating what's going on and that you're now "out of the loop".
I’m not sure if you have the proper paperwork to pull this off.
You need to make sure you, your seller, and T/B are covered when doing
a transaction such as this. Do you have the necessary paperwork to do this?
Yeah! Thats great to hear, I’m excited now :biggrin I have the naked investor paperwork I just need to figure out which docs I need to use and what order… Can you tell me which ones( if you have them) If not I will go thru them and put it together based on the info you have given me. You have been very helpful! Much apperciated!
Well, if you already have the paperwork, here’s how ya do it:
The CA Residential Lease Agreement and the Option to Purchase Agreement both are between the homeowner and you, (or your entity).
Then when you find the T/B, all three parties sign the CA Assignment of Agreements doc.
I prefer to have three original sets, so each party has their own set of docs with original signatures.
The place on the CA Residential Lease Agreement where it lists the tenants, I leave blank until I have my T/B. Then I complete that with their names.
What is the seller expecting from YOU (moneywise) if you L/O the property from him? If it’s unrealistic, for a L/O deal then offer an Land Installment contract or Agreement for Deed (Seller still retains title but gives you equitable interest) keeping in mind that you should be getting more from your T/B than you have to give the seller.
