I have someone interested in owner financing or lease option/purchase an investment property I currently have for sale or rent. I currently have $28,000 in this property. I have it listed for rent at $750 with $750 Deposit. I also have it listed for sale ( 8mos ) for $47,000. The potential buyer can come up with $1500 down and needs the payment to be around $650. I can have a lender check their credit. They have already said there credit is not good. Give me some feedback on what you would do… a lease purchase/option, owner financing, or your creative ideas?? Thanks for your advice in advance!!
The house is a 2/1 built in 1935. The neighbors were partying all the time, although that may have slowed down. The copper has been stolen from the Hvac unit. It has not been the best experience :banghead. I can say I have learned a lot on my 1st flip …flp. I always believe you can turn a negative in to a positive though.
Hi,
If I understand you correctly you have been trying to sell this property for 8 months with no takers? You don't say when you decided to look at the option of renting it?
You say your asking $750 rent plus $750 deposit and the current party interested in making a deal has bad credit?
What state are you in and are lease / options legal to do as one document together in your state?
Normally a potential optionee would put additional dollars upfront on top of the first months rent and security deposit for the option consideration, you probable want to recieve 3 to 5% for the option rights and normally charge more for rent to give the optionee some form of renters credit to be applied to exercising there purchase / refinance in say 3 years.
So you really should be looking for $3000 down and $850 per month with a $150 per month credit being given towards the optionee towards there down payment and closing costs! ($5400 + $1500 option credit + $750 deposit) Or $7650 in total earned credits.
I would also have a title or escrow company manage the lease / option payment each month as this is proof positive to a new lender that they have been making payments on the property on time as agreed! (It’s called a servicing account and it’s about $9 dollars per month, paid by optionee)
You also need a credit counselor to get involved with your buyers with your team mortgage lender to figure out how bad there credit is and how to clean up the credit and get to a level where a mortgage can be approved! You also want to make sure of your potential optionee’s work history and likely hood of staying in the same job long enough to have longevity and qualify for a new loan to excercise there purchase.
Do not offer to someone with no cash and bad credit owner financing as this put’s them on title and your only option to out them if they don’t perform and fail to make payments is foreclosure! At least 5.5 months in all states!
It’s certainly up to you as to how you structure a deal, however you want to put your “Interested Party” in the best position down the road to perform on their option and pay you off through a new loan on the property!
You might want to check with your mortgage lender and just make sure a loan for roughly $45k is being done in your area as some lenders will not make small loans!
GR
I have been looking to rent the property for a couple of months. I am in Ga and lease options are legal here. Do you prefer a lease option or lease purchase? I am leaning towards lease option myself. I wanted to sell the property as I have most of my cash tied up in it :banghead. This is the 1st re investment property I have purchased. I have made my share of mistakes on it!!! I really like your numbers it lays it out simple and straight forward…Thank u!! Any other ideas are welcome…
Yes , you are correct…the lender starts at $50,000…I can always raise the price. The house probably would not appraise for that though since there have been a couple of foreclosures on the same street.