What would you do with this?

[Trey Leigh]

My partner and I just bought our 5th SFR since starting here in 2011. We purchased it from a bank for 42000 intending to rent it at 800/mo which is very much possible based on our other homes. We put 5000 into rehab so we're all in for 47,000.00 appx. A realtor friend of mine thinks she can sell it quickly for 75-80K, deducting her commision and closing fees we would net about 20K, which is awesome, but our ultimate goal is to have 10+ properties for retirement income later on, and this house is in a great neighborhood near schools. Passing up a 20K profit though is hard to do, we could pay another property off with that, or reinvest. Ideas?

50% rule Cap rate is 10%

50% rule cash flow is 4800/year (We paid cash)

Also was approached today by a family that wants to do a lease/purchase on it until they can sell their other home, I know nothing about this so I referred them to our real estate agent to see if that is legal/possible/beneficial??

Thanks for any input

[Brian Gibbons]

Sorry John, but with all the uncertainty about Dodd-Frank floating around I would strongly advise against doing rent credits of any kind.

@Trey Leigh you may still be able to do a lease option but be very careful about how you do it. Search the website for Dodd-Frank and read all the stuff that's out there about it.

Patrick, that's why I referred them to a licensed real estate agent. I've heard the ins and outs of rent to own can be complicated and we definitely want everything to be on the up and up. We still don't even know if that is something we'd be interested in, hopefully the agent can put together some scenarios for us to ponder. Another question is how would the agent get her commission for a prolonged payout scenario like lease to own, or would she?

Dodd Frank has to do with Owner Occupied Seller Financing.

@Bill Walston will chime in here, as well as @Bill Gulley ,

If you have a lease and a separate option, no rent credits, you are not offering financing, just taking the property off the market for a set time, and giving some one time to get their DTI and Credit better.

Go take the Tenant Buyer to a RMLO and do a preliminary 8 point Dodd Frank check (See What is a Qualified Mortgage http://www.qualifiedmortgage.org/definition/)

Bottom Line - Have a RMLO look at every Tenant Buyer on a Lease with Option just to be safe.

To have the agent get paid, you could have some of the option fee to agent, and a lien on the title to have the balance of commission paid when the house sells.