Need Advice- Lease Option

[Ryan Kuja]

Hi BP'ers- I am hoping to glean some insight into a lease option deal that I am considering. It is a duplex in the area I invest in in Michigan. The upstairs is rented at 825 month and is in good shape. The downstairs needs about 8K in work. The owner is asking for 10K down and 900/month for 2 years, at which point I could exercise the option and purchase the property for 125K. With about 15K in work, the property should appraise for 175K. 

I would be responsible for upper and lower (which I would be occupying) utilities that average 300/month. I'd also be responsible for any and all repairs and work needed in both units. The property is city certified until 2021. So essentially, I would be paying 300 in utilities plus 75 (difference between the 900 rent and 825 income from upper unit) for a total of 375/month.

I own and manage several SFR's and multi-family properties, but have never gotten involved in a lease option. I tried to negotiate a lower downpayment, but owner won't budge. I am hesitant to put 10K down plus 15K in rehab into a property I do not own. However, there do seem to be solid benefits as well.

Any thoughts?