Lease Purchase

Hi, My name is Carol and I am new to investing. I need advise from a pro. I have found a three plex apartment building that has recently been renovated, new roof and remodel. It is appraised at $85,000 and has a mortgage, don’t know how much the mortgage is, we’re still just in the talking stage. he’s in and out of town a lot so I have to work around his schedule. The owner is willing to do a Lease Purchase / Lease with the option to buy. He is willing to do a three year lease. Two of the apartments are currently rented, bringing an income of $820. a month. If the third rents it will be $1,230 a month. This will be my first deal and I need someone to kind of guide me through it so that I don’t mess things up.
The renters have been in place for quite a few years one for 6 years and another for one and a half. I know it is a good deal, I just don’t know what to do first. I think I may be able to get the property for what is owed on it. Any advise will be greatly appreciated. Thanks, Carol

Howdy Carol:

So far you know very little about the deal, basically the rents and appraised value. You can not do anything but guess with this little info. Does he seem like he needs to sell or lose the property, finding his needs and filling them will help you determine how low he may go. I met a guy today at a garage sale that said his house was for sale too. I found out in two seconds how motivated he was. His statement was that he would sell if he got the right price inferring that an above market price would have to be offered and alll cash. You get the picture.

You just need to work the deal to find out more info like how much down or what deposit if any. You have not even gotten his asking price. If you can get it for 10 to 15% below the appraisal with little down you may have a great deal as long as the expenses do not eat you up. Who pays the water bill. This alone may kill thecash flow if the taxes and insurance do not do it first. Sorry to be so negative but I had a triples where the water bill was as much as the rent some months. We checked for leaks and never found one. I called the water company every month and had the meter changed and still got way too high bills. Do not jump in head first until you have seen all the numbers.

Hope this helps

Hi Ted, Thanks for your response, it does help. He is asking $85,000 the appraised value of the property. And I beleive that the Tenants are responsible for their own utilities. I do not live in a large town and most of the people who do rent around here are responsible for their own utilities. I’ll know more about the deal ina day or two when we meet. Is there a clause that I can put in my contract that will make sure that the contract is assignable or that I can sell it? He seems to be pretty motivated, his job takes him out of town a lot and he is unable to be around to watch the property. Thanks for your help. Carol

Howdy Carol:

The chapter 7 trustee handling my case for the court learned that the contract must have or assigns beside the name of the buyer ib the legal proceedings in order to assign the contract to another buyer and not have to get court permission to do so. This is a bit extreme and have been told by others that all contacts are assignanble unless otherwise stated in the contract and as or assigns was not necessary and may even alert the seller that you plan to flip the deal. Banks are now even requiring offers to be presented with proof of funds and no assignments to help stop flip deals that may have little chance to close from newby investors. This is probably more than you wanted to hear. To cut to the quick contracts are assignable and to be sure it is add and or assigns after your name but risk a chance of being discovered as new or a flipper. Since you are dealing with an investor owner you will probably be OK without the additional words.

Very few triplexes I have seen are metered separately for all utilities. Check them all.

Hope it goes OK when you meet. Do not be afraid you will do fine, It is OK to let him know you are new. It may even be a good ice breaker to talk about his first deal and how he got started etc.