My first SFR lease option, a no money BRRRR!!!

[Joseph Cornwell]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $55,000
Cash invested: $35,000

My first lease option, single family rental. I have an employee of mine who could not obtain the loan. He works for my construction business, so we worked out a deal on the purchase and renovations. I paid cash for the property and renovations, he did most of the work. I will refi the property after seasoning and pull out my capital plus 20k in profits. I will then cash flow around 400/mo. The buyer/tenant has a 5 year option and is responsible for all utilities and maintenance during that time. We also have a set purchase price written into the lease option. The labor on the renovations was his "down payment." There is also a clause that if property taxes or insurance increase, the tenant pays the difference as well.

This was a cool deal that created a win, win. Its a no cash deal with great returns and cash flow, plus low to no maintenance for me. It allowed him to buy a property without bank financing, and start building equity instead of just renting. He has about 30k in built in equity day 1. His payment is also cheaper than his prior rent.

Who else is doing lease options?

What made you interested in investing in this type of deal?

My employee asked if I would buy a house and provide a note for him.

How did you find this deal and how did you negotiate it?

This was sent to me off market by a wholesaler.

How did you finance this deal?

I will be using conventional financing on the REFI to pull my cash out.

How did you add value to the deal?

We did about 50k in renovations, I paid for materials, my tenant did the labor.

What was the outcome?

Should appraise 150k or higher on the REFI, I will pull out my capital plus 20k. It will then cash flow 400/mo during the lease option period.

Lessons learned? Challenges?

So far no major challenges, as long as the tenant keeps up his end of the deal it should create a great win win type of deal.