I have found and located my motivated seller. I just want your opinions on which deal would be my best choice. I’m thinking to Sandwich lease it. What do you think?
This is the email she just sent me:
"Not a problem— I will take 178,000 for the property…I don’t have time to wait for mine or the others to sell… My appraiser pulled everything in the area that is comparable for me— It looks like right now he could get between 185-190, I just really want the head ache gone…. I owe appr. 164,000
Let me know if you would like to move forward I have a couple coming too look at the property this weekend… There lease isn’t up for another 2.5 months so let me know!!!"
The only con to this property is that it currently has tenants who are NOT paying rent. And as you can tell by her email, they have 2.5 months left on the lease. What can I do to either get money from them or get them out of there.
I’m thinking of offering her 172k for it. That way she gets 8k from what she owes on the property (172k less what she owes which is 164k) and I’d get between 13k and 18k from the equity. Then I’d sandwich lease it and have the tenant receive an option to buy at let’s say 187k plus rent each month. Can I have some opinions on this deal? Thanks in advance!
–non-paying tenants, that would knock $10k of the price right away for me. You could have a very lengthy, time consuming & expensive evixtion on your hands
—you are basically paying retail (apprasials means nothing in a declining market
—this “another couple is coming to look”…who cares…these “other buyer” are phantoms 99% of the time
—lease option back to non-paying tenants…that’s down right funny…
I don’t see any money to made unless you do a sub2 deal with land trust, but even then the margin is extremely thin plus you could easily end up holding for several months due to the non-paying tenant.
What If I negotiated with the homeowner and tell her that the existing tenants need to be evicted due to non payment before I sign any papers?
That way I can sandwich it to a responsible tenant/buyer. I’ll have 13-18k in profits if the tenant/buyer exercises the option to buy, plus I’ll have cash flow each month.
Maybe I can talk her down, getting a deep discount I could sell the option to someone or have a private lender give me the money for the upfront principal, fix it up cosmetically and flip it.
It’s all about the numbers. I don’t know where you are. $172k may be a good price or not depending on the local conditions. I do see a problem with only getting 10% off the comp price. That is paying retail.
Evicting tenants is not a big problem (it depends on where you are) in Texas. They would be out before you own your first note.
This is not a motivated seller. Well, maybe they are motivated to pass this dud to you!
Worse than all that, you posted this “deal” but didn’t list the rent. Operating rental properties (including lease options) is ALL ABOUT THE NUMBERS. I’d bet that this is a NEGATIVE CASH FLOW PROPERTY. In fact, I’m absolutely sure it is and you didn’t even post the rent. The current owner payed too much; is losing money every month; and now has a bad tenant. No wonder they want you to take it.
Forget looking for motivated sellers - that’s just guru nonsense. Start looking for sellers that are desperate. The difference is that “motivated” sellers would like to sell their property. Desperate sellers will do ANYTHING to stop the pain (and they throw-up a lot due to the stress).
I still don’t understand why a sandwich lease is not feasible…
House is going to cost me 170k and it’s worth 185-200k. If I can rent it for Positive cash flow then it’s a winning situation for me. The house is in a good area and looks good cosmetically. Sounds like all of the positives are with me. Any thoughts?
I feel like you do not give enough data to know if it is a good candidate for a Sandwich Lease Option. You do not state payments, what the market rent in that area would be etc. How motivated is she? Would she be willing to wait 1 year or 2 to get her cash out? It seems like you state that the tenants in there right now are behind 2.5 mos. in rent and that you have another set of tenants that still have 2.5 mos. left on their lease, is this correct? You are going to have to get rid of those tenants. Call an Attorney and see how much an eviction would cost? Go offer the tenants a couple hundred dollars if they leave the property intact, have her do this with her money. Once you get them out, go put a “Rent to Own” sign in the yard, after you set up a agreement with her, and see what kind of interest you get. You need to sit down and look at the numbers make sure they work. Make sure there is not an Adjustable loan on it.
crazy deal…pass…there are many other deals that will require less work and more profit
…why go through all that work,u need to run some buy ads and cherry-pick…get on those emails from realtors and banks too,
my 2 cents
Robert A. Doncaster, Jr. - “RAD”
Import/Export Entrepreneur & Investor
*** DO YOUR HOMEWORK ***
Chicago Illinois USA
& sometimes Salzburg, Austria
I can get the house for 170k and sandwich lease it for 185-190k. In her last email she said that her mortgage payments are 1100 a month. Now she also stated that her friend rented his place out around the block (same neighborhood and type of house) for 1200 and that was 2 Years ago. She thinks I can get 1400-1500 in that area (Good cash flow). Plus I can sell it later for an appreciated value of the house if the first t/b doesn’t exercise. 5% each year is normal in the area.
With all these numbers in mind, I only see opportunity.
Getting a house worth 185-190k and paying nothing down (15-20k profit from equity), getting a steady cash flow of 300-400$ a month.
Is this still a bad deal or what? Yes, it may not have a HUGE profit margin but, I’m only starting out and this seems like a good deal to me.
You’ll be upside down in this thing the day you take the keys!
Propertymanager figures that HALF of his monthly rent collected will go to EXPENSES…HALF…Let that sink in for a moment.
HALF!!!
So let’s say you GET the $1500 it only leaves you with $750 to pay the mortgage. You have to understand that owning rentals means, repairs, tenants leaving wothout notice, unoccupied homes,taxes, insurance, the list goes on and on.
YOUR PAYING TOO MUCH FOR THE HOUSE!!!GET IT!!!
I know your new and excited, that’s GREAT you should be. BUT…
I’ve seen more new guy’s get SMOKED in this business than I care to remember. It can ruin you for life.
Before you get ahead of yourself go to this web site…
It’s about a 24 year old kid who bought 8 houses in 1 year, READ IT.
He’s facing foreclosure on 6 of them and he’s $2.2 MILLION IN DEBT. That’s what can happen when you want it TODAY instead of being patient. It’s easy to screw up, the hard part is doing it right!
RELAX!!!
Real Estate is a marathon, your going like it’s a 50 yard dash. You know what happens to the guy’s who start a marathon running flat out??? They don’t finish. You WANT to finish!
We’ll help you out, keep looking, your excitment is GREAT! Just channel it correctly. Pass on this one and send us the next one to review. Don’t worry next year you’ll be swimming in them. 2008 will be GREAT!
With all of this in mind I will be getting $4750 for nonrefundable option to purchase, 200+ cash flow each month, and if they decide to exercise the option, I will receive a check for about 10k.