Combine Rehab with Lease / Option

Rehabbing, Fix and Flip, Rental Properties
1

In a typical situation, an investor would buy the rehab property, renovate and then resell. There are expenses on the buy side and on the sell side. What if instead of purchasing a property, I offer a 1 year lease / option contract to the seller, during which I pay them say $4K for option consideration (negotiable and will apply to the purchase price when bought) and some amount of “rent” per month (negotiable). Let’s say the rehab takes 8 weeks to complete, after that we put the house on the market for (hopefully) a higher asking price than we negotiated with the seller. When we find a buyer, we enter into a “double escrow” and basically buy it from the original seller and sell it to the new buyer on the same day. The savings would come from only paying for the “sale” of the property.
Hope this makes sense.

Your comments are greatly appreciated!

Thank you,

IG.

2

Talk to your title company to see if they do double closes, some do not. Make sure you know your area and the market prices so you don’t overpay on your option. There has been some discussion on listing with a broker whether it is legal or not? Some people say you can’t list with a broker if you only have it under contract. Try and keep your option money lower if you can $4K seems like a lot. Keep in mind that you will be using your money for the rehab work with a lease option, unless you are using a line of credit or credit cards.

Just some thoughts there will be more.

NDI :smiley:

3

Thanks NDI,

I used $4k as an example. It’s a negotiable item and I’ll try to keep it as low as possible. Good point on the listing with broker though. I’ll keep it in mind.

IG