New to lease options. Here is the story. I have a family who owns a home and she is prepared to walk away from the property. She is not behind and she wanted a loan modification and didnt receive it. She has a mortgage of 59000 and she has 44000 left to pay. She doesnt want anything to do with the house her rent is 625. What should i do? :help

What’s the retail value of the house?

If the rent is $625 what are the loan payments (principal, interest, taxes, insurance + homes association)? Is this an adjustable loan, or fixed rate?

Just because someone is walking away doesn’t mean we want to walk into the deal. Unless there’s an upside here, I’m not seeing a deal.

Upsides include , high leverage (no down), forced appreciation, appreciation, accelerated mortgage pay down, rising rental rates (falling vacancy rates), reselling for more money, seller financing and creating a spread on the payments and equity, or a combination of these.

Some might argue that simply controlling the property until it’s paid off would be wise. If you can support negative cash flow for a while, and then just wait, you’ll eventually have an income stream. After all you don’t make money in real estate if you don’t own/control it.

I’m talking more about getting the title, not lease/optioning. In this case, with what you’ve shared, it would seem to me that you need more exit strategies than a lease/option would provide. I would just take title, and then treat it like a rental and then get a new loan on the house whenever it made sense to …without making any promises to the seller about when this may or may not happen. You won’t get new financing until you’ve got about 20-30% actual equity in the property anyway, so how long that takes to happen is a question.

Lease/Optioning the deal seems really impractical. I mean how many years are you planning to go with this thing until you can either sell it, refinance it, or otherwise exercise an option here?

Notwithstanding, if the seller has owned this house for a long time …and paid much less for it …and refinanced the loan for a higher amount …the seller might need to ‘sell’ the house now, before it converts to a non-owner occupied situation, tax-wise (especially if the seller pulled cash out on a ‘refi’). If he doesn’t sell within a certain time, after moving out, he’ll get taxed on his gain (if any).

This is why I think taking title is more profitable for the seller, if not you, then simply engaging in an iffy lease/option deal. The seller is going to need to know if the house is actually going to be sold, or not, for tax purposes.

Anyway, lots of questions need to be answered.

its fixed and that price includes insurance and taxes no hoa dues.

Well… if the rent covers everything, but maintenance, management and repairs …and you can walk in to the deal by taking title, then just consider this a high leverage purchase and go for it. I would, just to control the asset. Evidently, the seller’s been paying on this loan awhile, since only $44k is owed on an original balance of $59k. That means the principal is now being reduced relatively quickly. So, that’s an upside. Actually, we have two upsides at least here; high leverage and accelerated mortgage reduction.

So, I would still say to buy this. Why not? I would not recommend a lease option. That’s just impractical for the length of time required to make this deal worth messing with, as I mentioned in my last post …apart from the upsides I mentioned.

Just get the deed and take over the payments. Then check through my other posts in this forum section about the mechanics of putting a sub2 deal together. I think there’s enough to keep you in trouble… :anon

Have fun and don’t be afraid to make money slowly, but surely.