I am sorry I have been off the board. I had my eyes fixed. I will look into it, but I think that since I still own it it is not flipping. I will let you know.
I notice in this discussion that those who are arguing against lease/options are in good rental markets (i.e. Texas) where rent is high and prices are low.
If you live in any of the higher priced metro areas then it’s a no brainer… rental = negative cash flow unless you bought many years ago or you put a huge amount down. While lease/options done properly mean positive cash flow even if you put nothing down.
There’s one major flaw in the understanding of the buy and hold guys on this thread. They are asking: “What TENANT has a chunk of cash to put down?” The answer is, not many. But cash flow investors (lease/option, contract for deed etc.) don’t sell houses to TENANTS, they sell them to BUYERS. And most buyers do have cash saved up for a down payment.
I live in one of those markets where buy and hold makes no sense. When I got started I searched high and low for good buy and hold opportunities and quickly realized that I had to do something different or I would never be able to invest. That’s when I discovered lease/options and a year later contract for deed.
Here’s my experience over the last 7 years of doing these deals:
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A 25-30% spread between what I’m paying and what I’m collecting is normal and easy to get. That means if I’m paying $1,000/month then I’m collecting $1,250-$1,300/month.
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A 10-15% spread on the price is normal and easy to get. That means if I buy for $100,000 I’ll sell for $110-$115,000.
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3-5% down payment is normal and easy to get, in fact I’m usually offered more in exchange for a lower payment.
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Buyers take very good care of the property.
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2 to 3 weeks is the normal timeframe to locate a quality buyer from scratch (this is assuming you don’t have a list of buyer’s waiting for that kind of house).
Buy and hold and cash flow are two different businesses. With buy and hold you’re hoping to own a long-term asset with increasing cash flow and equity and for that privilege most landlords have to struggle through years of negative or breakeven cash flow and tenant headaches.
While the cash flow business is all about just that, cash flow, and lots of it from start to finish. You act as the bank who borrows at a lower interest rate and lends at a higher one. For this privilege you give up long-term appreciation.
You don’t have to choose between one or the other if you’re in the right market, you can do both. Get yourself some cash flow deals to support you going full-time, then pick up some buy and holds for the long haul.
Hey Doug,
Just out of curiousity, where are you doing business? I’m from nyc, and just like you were saying… positive cashflow from rentals around here is pretty much non-existent. I’ve been reading up on doing L/O and that might be a better strategy to use around here. What do you think?
there alot of multifamilies here as well…(many of them converted illegally)…so that makes it a bit more challenging huh?
Which brings me to another question… what would you guys suggest I can do with a home that has been illegally converted? These people spend all this money to add another kitchen and bath to bring in more tenants… and now they want more than what it should be… it’s fairly common around here…~ :help