We’ve just negotiated our first property and the numbers look good. The house appraises at $130,000. The owners have both lost their jobs and are willing to sell for the mortgage payoff of $88,000. Our initial exit strategy was to update the house and flip it. However, the market is a “slow growth” and I don’t want to pay holding costs for months before it sells. I’m thinking a lease-option would be a better way to go in this market. Any thoughts?
You could do that… you could also look for private money for holding costs and ‘prehab’ costs… perhaps marketing costs as well.
If you lease-option… look to get a nonrefundable option deposit… 5 to 6% of purchase price which gets applied to down payment if they buy if you haven’t heard of that yet.
Also… you can play with your cash flow by asking how much they can pay above monthly payment if all of it gets credited to lower purchase price if they buy.
Thanks for the feedback. I was going to ask for the nonrefundable “option” deposit up front and try to get above costs for the term of the lease. Private money may be an option for holding costs. I know of someone who might be willing to do this. Thanks again.