Subject to with rent to own tenants

[Elliot Angus]

I recently came across an interesting opportunity and thought I’d share the details.

Mortgage Details:

• Outstanding Balance: $70,000
• Fixed Interest Rate: 3.75%
• Monthly Payment (PITI): $950
• Loan Maturity: May 2045

The property’s current market value is around $225,000, leaving significant equity on the table.

Tenant-Buyer Situation:
The property is currently occupied by Rent to Own tenants. Apparently they handle all property repairs and maintenance independently and have maintained a perfect payment history, even throughout the pandemic.

Lease Option Agreement:

• Effective Date: November 1, 2022
• Terms:
• • Purchase Price: $165,000
  • Non-Refundable Down Payment: $10,000
  • Lease Term: 3 years (ends October 31, 2025)
  • Final Payment: $158,000 balance due upon term completion
  • Monthly Payment: $1,150 (no rent credits)

I didn't see this to be a deal because if in a the best case scenario my $25000 would walk away with 2400 which is about a 9% ROI. Now the 9% doesn't seem to be a terrible deal, but then I calculated the risks involved. This sort of deal could go south very easily and for that reason I stayed away.

What would you do?