Help me propose an option to purchase?

First post on these boards, lots of great info here. Sorry to be asking such an open-ended question, but I am away from my books on the subject and would like to move quickly on this.

I am looking for advice as to how I should word an option to purchase some resort rental properties that I’m looking at.
The sellers are offering me a 15% discount on 3 properties that are situated near each other as an incentive to buy them as a group.
Asking price would have netted them $250K, but it is being offered to me for $215K. The problem is that I was only looking to purchase 1 property, and have only got around $15K to work with.

Just some basic info on the properties:
The units are only 7-8 years old, occupy an aggregate of roughly 2.5 acres, and come furnished, ready to rent.
Their occupancy rates for the last 3 years suggest that they could be self-sufficient eventually. I say eventually because the resort rentals show an erratic and seasonal monthly income, I’m prepared to goose them with cash once in a while until they establish their own reserves. That should happen within the first full year of ownership.

I have looked into financing them with an 80/20, (7.375%/13.125% respectively) and the lenders want 6 months of reserves in the bank to do this. With PITI, I’m close to $15K already on just the reserves, and still have the other closing costs to consider.

I have not broached the idea of seller financing yet, I wanted to have a proposal ready beforehand. I’ve never used options before, so please let me know what you think of this offer, and how I can fine-tune or correct it…

I was thinking of offering them 5% down ($10,500) to buy a 1 year option to purchase the properties at $199,500. I could pay them a note on the other $199,500 at 12%(amort. for 30) for $2057.23/month for the duration of the option, with 1/3 of that amount to be applied as downpayment when I exercise the option.
I would like the option to be able to be exercised before the 12 month period is up if I choose to do so.

Is this a viable offer or is it way out of line with what you see out there?

I suppose I should start at 10% interest and 1/2 applied towards down to give me room to negotiate? I don’t want to insult the people, I’m not yet sure what their attitude is regarding seller financing.

The 10% and 1/2 towards down scenario would net them an extra ((1755.14x12)/2) $10,530.84, and give me the same to put down. Obviously this seems best to me, but is this typically enough incentive for the seller?

The 12% and 1/3 towards down scenario would net them an extra ((2057.23x12).66) $16,293.26, and give me $8,146.63 to put down. Worst acceptable case, but am I selling myself short badly in this scenario?

Come to think of it, should the principal paid during the option period count towards the final selling price also?(Edit-Upon further thought, I guess this isn’t much to worry about, considering the amount of interest paid vs. the amount of principal paid in the early years of a mortgage.)

If I decide to not exercise the option for whatever reason, I guess I forfeit all monies invested so far? (edit: Yes, read about that in the articles section)

I also assume that I should include language that would allow me to sell the properties to someone else while under option?(Edit: Read that , nless expressly forbidden, options are assignable and sellable in a double-closing type deal)

Thank you, thank you, for helping the newbie. :wink:

Be tough to do, but is doable.Where is the property? Do you have tenant buyers in place , becuse if this resort residental, and is seasonal you could possilble have a cash flow problem. What is the comps in the area? What is your mid Fico?What is your income.


personal or LLC?

It’s in OK.
You’re right, it is resort residential, I’m ok with that aspect.

Their occupancy rates for the last 3 years suggest that they could be self-sufficient eventually. I say eventually because the resort rentals show an erratic and seasonal monthly income, I'm prepared to goose them with cash once in a while until they establish their own reserves. That should happen within the first full year of ownership

Comps in the area are from the same development, 2-$110K sales within the last few weeks.

Mid FICO is 697.

This year’s income just broke $100K, estimating $150K/year.
The properties would be their own collateral, right?

Can you elaborate on I.C.E. concept? I’ll go check out the articles section for it.

I do have an LLC in my home state of Louisiana(I have a rent house also), but I’m not registered to do business out of state anywhere.
Would it be legal for the sellers to put the lease option in the name of an out of state LLC?

Thank you for your response. :slight_smile:

The lenders like to see Income, collateral and equity. The less risk involve, the better the chance of getting approved. Tired… To many response. Will post the rest soon. Give me until tommorow.

OK, that’s what I thought you meant about ICE.
And yes, it’s late. Tommorrow is fine. Thanks.

I’m just not very confident that I can get a lender to float this one. And being so cash poor at this particular junction, it would be hard to get the numbers right for any hope of a positive cashflow.
That’s why I’m thinking about selling them on owner financing of some sort.

I guess the main point of this thread would be:

Do you feel like the 10% interest rate and 1/2 applied towards down payment lease option scenario is a plausable incentive for the seller to carry financing? I know it’s pretty subjective, just looking to hear some opinions from people that have more experience with lease options than I do.
Should I start lower?

Check the mail. Will give you an e-book on lease option.

Finding a tenant buyer is easy. I have 17 years in sales and marketing, I will share with you. God said if I giveth it, I shall be bless 10 fold. Have a pen and paper ready and expect my next email. People are so focus on problems and reality that we are not creative at all. Think out side the box. Talk to you tommorrow.Tune in tomorrow same bat time same bat channel. HOW TO ATTRACT TENANT BUYERS FOR FREE AND HOW TO GET THEM TO BEAT DOWN YOUR DOOR!

Sorry, for the late reply. See how I sold you guys. I throw a value out there and increase that value by saying for free. Same principle. Here is how you find tenant buyers.

Yes magnetic car sticker will work. a few leads.

1-800 -homes- make the numbers so stupid monkey could remember.

KISS- Keep it stupid simple. Yes on you magnetic sign on the car.

A website that says How to buy your dream home as little as 3%-5% down even with bad credit. Call to find what private investors won’t tell you. Limited offer! You have to have to have time value to make people act. Like a child. You give him one small taste of candy one piece at time.

Place small ads like this on the internet in forums or classified ads. with phone numbers.

Put flyer display with business card in laundry mat.
that says the same thing but you also add more value. Save 6 % on your next house. Call today for more info. 6% offers expires soon must act now… keep change the date for you next set.

Think like a renter. Where do they hanging out at. Coffee shop etc. get the idea. Always be selling and closing.

What newspaper they read. Home buying magazine and news papers, and home publication magazine for renters. Do not have to be fancy. 3 small lines will do. Put your code into each marketing piece. If you can’t track it, you can’t measure your progress and growth. Ask the client, which marketing piece they called off of. What made you call me instead of a realator.They probably say the commission part.

The cheapest is referrals. Do you know anyone like your self that would like to seize the opportunity? They at least know 2 o3 people. And those 2 or 3 know other people. Get the idea.

Wedding home show.

People go to find gowns, flowers.jewerly, and caterer. Etc… What is the next step after marriage… a house…a car? Then kids… get the idea…

Now remember most American are reading at an 8th grade education… Do not use BIG words.

Give an e-book about testimonals…Tell the story or joke… get them to come back for the climax or punch-line. Always be selling and closing. When you were a kid you work your Mom and Dad. If you didn’t get what you want… you cry…That is closing your parents.

Try this for now, because if I give you too much info, your brain might over load… Post this some where so you can visualize .Put a car or a house next to these items… Hell even put your kids next to get you motivate to take action, but at least take action. Now people with bad credit will be in next class schedule. Someone has to remind me. Too much business with all loans for hard money, commercial. etc. To may request. Thanking for attending Real Estate 101.Good night boys and girls. Where is my apple? :0)

Thanks man, lots to chew on. I’m sure I will have more questions later, but I will read that material as soon as I get a chance.