help w lease option deal

I hope this post get read,
I am a fairly new to investing, new meaning I havent actual completed a money making deal…

But with that said, I am in the position to aquire two properties with a lease option. My concern is that one of the properties is over financed and the seller will not be able to afford the mortgage for long. I offered a solution
in which we reduced his mortgage meaning - I take control of his home, I pay a portion of his mortgage and his pay portion, reason being that his current monthly payments would be too high for a renter or tenant buyer to cover, let alone making any cash flow…

also in our agreement a portion of what I am making from the tenant I put in the property will go directly to principal of his current loan. In hopes that this reduces the loan over a period of time where I could realistic have someone in position to purchase the property.

80% of me say walk away, but this young guy needs my help and if I work hard and do what I say I can do, I could be make a little cash flow.

These are the numbers, this home is fairly brand new,
built in 2002. 3bed, 2full bath. Its not a great location , The house and other houses were built by a non profit org. - right accross the street from low income aparments.
Its appraise value is around 86K … The seller bought the home for 90k. He then got disperate again and refied in March of this year and his new mortgage is 104k. monthly payments 885.00 a month.

With these numbers the house can not be realistically sold until the mortgage balance comes close to 87k or 90k
and thats at least 2-3 years away with large payments on a monthly basis going to principle.

He ask me can sell the house for 88k or 90k and make payments himself on the difference. I told I didnt think so without him getting a personal loan, and or refinancing his truck to pay the original loan at closing.

I Know I wrote alot, but could one of the experts on this board give some type of advice. I meet back up with the seller sometime this week.

The house is in great condition, the seller is single and never used 2 of the rooms, and the kitchen looks like it never been used. I really dont want to just put anyone is the house to get the deal done, I want to make sure the house is well taken care of.

Is this a good deal, to anybody have any feed back

Howdy Jamestic:

Even in a perfect world where you will get the payment on time from your tenant and they are perfect in every other way it is a bad deal. It will be a lot of trouble and you are paying down on a mortgage that is over the value. I have a 1998 Dodge truck I will sell you for $22K and I will make the 1st years payments for you. Interested ?

The old ugly what if scenario always raises its ugly head to make the deal even worse

What if the seller makes a few payments and then move far away/ What will you do?
Tenant trashes the house and gangs and dope dealers show up and you have to evict. All this stuff happens even with great cash flow deals. If it happens on this deal you will be upside down even more.

RUN RUN RUN AWAY AS FAST AS YOU CAN. Somebody had to tell you. Do not do deals because you like someone or want to help. Send cash to Katrina victims if you want to give your money away or go help rebuild one of their homes if you want to work for free.

Just chiming in to agree with tedjr. The deal is about the math. It cannot be about how your ‘feel’ about the property or the guy selling it.

If he is single he may want to consider renting those two unused rooms to roomates to help him with his mortgage. Otherwise, he can walk away and let the bank take it back.

When someone says RUN RUN, RUN they usually know what they are talking about. In this case, I have to agree.


Yeah, every expert is telling me to run…
I think I will…

thanks everyone…


I may have solution to this problem, but we need talk over the phone. I’ll need to get more info and it would easier for us to talk on the phone.

James T

Maybe you can try shortsale the property. Talk to the bank.