Sorry, I don’t know if I should post this question to the L/O forum or here…
I have an unconventional idea I’m thinking of trying. There is a house I’m interested in. I am planning on trying to get it for $140k. It needs minimum repairs of $15k (foundation and fixing cosmetics associated with that but no updating of anything else) and it will sell for $203k after that. If I spend $10k on modernizing it I can sell the house for $220k.
Here’s the problem. The local hard money lenders don’t lend on ARV’s over $150k. My friends and family don’t have that kind of cash to loan. I do have enough money for repairs and holding costs just not enough to actually buy the house. I can’t use a conventional loan because it has foundation problems.
So I am thinking of approaching the seller with the idea of a lease option. I would lease the property for max 6 months (although I’d do a year long lease) and execute the option to buy at $140k when I find a buyer after rehab. Lease option seems like a better way to go instead of doing a wrap around mortgage or seller financing because the seller is in pretty dire straights and still owes money on the house. It just seems like they would be more comfortable/familiar with the idea of leasing it for a short period of time until I buy it. It’s what lots of homeowners are doing anyways if they can’t get the price they want - they just lease it instead. The house is in a very nice neighborhood with average DOM of 60 days or less. It’s very hard to find good deals in this particular small city because demand is high for this area, especially at the lower end of the price range (low $200k’s)
Do you all think this is possible or even a good idea? Are there pitfalls I should be aware of? I am in Texas - would we fill out the standard lease form and then also sign a Purchase agreement showing I have the option to buy at $140k? Instead of doing a double closing should I put my name OR ASSIGNS on the purchase agreement so the seller and end buyer can just do their closing and escrow will send me my cut? Thanks for the help!