My lease option deal

hello everyone,
I wanted to post my L/O deal and get some feedback, please let me know if I’m missing something.

I purchased a home on 10/29 for 35k, the appraisal came in at 43k. It is a 3brm/1bth, I am redoing the kitchen floor, countertops, putting in new carpet, ceiling fans, and all new elec.(plugs, switches)… Also putting a new roof and doors on the garage. (About 6k updates)

I intend on doing a lease option with the following terms.
Purchase price- 55,900, option fee- 1600, monthy rent-550 for 12 mos, with a 100 rent credit.

Buyer would need to have about 2k to get into the home. I would extend the option up to 24mos if buyer cannot get financing. Option fee and rent credits to be taken off of sale price at the end of term, (12mos/$1200, 24mos/$2400). That would be 4k after 2 years.

How do these numbers look for starters??? My PITI payment is $310/mo.

Thank you for any input.

g, how are you arriving at the $56K purchase price?

The assessed value on the auditor’s website is 56k. The original asking price was 59k but after 6 mos it was lowered, and then another realtor took it over and listed it at 49k. I got it for 35k with a cash offer. The house had 1 owner for 25yrs and needs some serious updating. I also looked at comps of other houses on the street of similar size.

g, I suggest you ignore the assessor’s estimate of value. They are often nowhere near market reality. The only true indicator of market value is recent sales of comparable properties.

One thing I noticed is you said the appraisal came in at $43k.

If this is true and given it was a good appraisal…I can’t imagine $6k worth of updates and 12mos giving you enough value for your TB to purchase the home at $56k.

Did I miss something here?

The appraisal came in at the lowest of the 4 that were compared to it. Is that good or bad? The house is really solid and has nice features, hardwood floors, bar in the basement, detached 2 car garage, etc… the man that owned it was a carpenter and did a lot of nice work on it. I think the appraisal was somewhat low because the purchase price was so low.
Does this price seem completely unreasonable, even considering that the L/O will be appealing to people who want to own but can’t get financed??

I think the bottom line is you paid too much for the amount of work needed. You can try to lay your mistake at the feet of the T/B but they might not be willing (or even able if the house doesn’t appraise in 12 months) to pick it up.