Subject to Pricing

Hi,

I’ve done some rehabs and own some rental properties. I would like to venture into the Subject to arena. In my area, a bread and butter home starts at $250000 minimum. Housing that used to sell in hours are now taking months. Our market has come to a screeching halt.
The average rent in my area in $1200 to $1300 for a 3bdrm 2 bth 2 car garage. If I take over a homeowners mtg at $250000 , that would be $1660 dollars a month, that doesn’t include taxes and insurance. My question is will I be able to lease option a house for more money than the average rental can bring in? Is subject to viable in a once “hot” market that is now cooling? Thanks, Maria …Florida

I base the payments on mortgage rates not rent rates; typically 3% above what I’m paying. It’s the only way to get positive cash flow in a low rent-to-value market like yours.

Whether you want to buy in a cooling market is up to you. Personally I wouldn’t buy conventionally without a massive discount, but creatively can be less risky.

Dougon

“I base the payments on mortgage rates not rent rates; typically 3% above what I’m paying. It’s the only way to get positive cash flow in a low rent-to-value market like yours.”

That’s not right, Doug. The reason people have so much trouble getting the right rents is that they don’t rent out anything but the usage and occupancy of the home. Where is the incentive for your tenant other than to “make the landlord rich”? 44% of the landlords in America are losing money and that’s because they are doing it all wrong.

There are other benefits of homeownership that the landlord has that can be traded to the tenant for MUCH higher rents. I do it all the time. How about the tax writeoff, mortgage interest, a share of future appreciation, or mortgage reduction for just a few?

And, Mom, a lease option as a seller is a prescription for disaster. Why would it bring higher rents? What are you giving the tenant other than rent credit and the right to buy it at a fixed price at some future date? All lease options violate the DOSC, and most are really “disguised sales”. Look up “equitable interest”. I guarantee that if your tenant goes into default you’ll become familiar with that term. There are many ways to turn your lemon into lemonade. You just have to add the right amount of sugar.

Da Wiz

LOL another thread gets ‘wiz’ on it. Must be all that lemonade.