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Updated almost 9 years ago,
Lease to own deal make any sense? help
Lease with an option to buy contract deal....
So I tried to get seller financing but the seller owes a lot on the mortgage still and plus, for some reason, the seller is paying a very high monthly payment (2200/month)
When I first contacted them they told me they were extremely motivated because they had a divorce and the seller left the state.
I offered the seller a 30 year seller financing option that would pay her like 1200 a month. She immediately was open to seller financing until I told her the amount they would get per month, when the seller told me the bombshell price they were paying per month.
So the deal sort of died. But the seller contacted me with an offer that was this:
...
Lease Option contract
20k down and will apply 200 a month toward principal.
Sale price 310k. It's worth about 340k. As I mentioned I have a written appraisal from 2011 at 330k.
Payments 1800/mo
You are 100% responsible for property.
(I had it rented at 2400/mo)
..
Keep In mind the house is nice and new construction type but its not a single family, it is a twin house. a luxury one, at that.
I don't really see what the advantages of this deal would be for me because I would have to buy it probably within 2 years and I would need 20 percent down payment which is around 60k and I just don't see saving that amount of money in 2 years, right now I have less than 10k liquid cash.
Before I walk away from the chance to at least be in the drivers seat to own the house, I was wondering if you guys thought it was a deal or just a way for the seller to unload. Keep in mind, If I can't get the down money and say she wants me to buy it in 2 years, Id simply lose the house and the 20k and the 1800/mo 'rent'. The positive of the deal would be I could cash flow a little bit off it for a couple years and somehow convince a lender to loan 350k to me when I really only make 50k a year but have no debt.
What isn't stated is how long the contract would be, but I assume no more than 3 years. That gives me 3 years to get a loan on the house. I have zero knowledge if banks or lenders would even care that I am renting it out and show it is a cash flowing asset. I assume that would help, but that it simply comes down to my debt to income, and what my income is. This lending environment is extremely tough, my Uncle has told me about 10 years ago when he was doing 40 deals a year. It's crazy how hard the lenders are and also the hard money guys are ruthless. End rant, haha.
I think the main problem with this deal is that the going rent (2400) per month, is only 200 more than the sellers mortgage. So there is zero wiggle room.
I asked if she would accept an offer for the balance of the mortgage, she refused. Also would she be open to having me take over the mortgage, refused. Not sure Id even want to take it over but I would at least control the asset.
If you have any counter offers suggestion or just think this deal is worthless, please. tell.
Thanks guys.