Trying to arrange my first deal..here is the proposal!

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Okay, so I found this vacant property that I really want to purchase as my first investment property. I contacted the owner of the place to talk to her about selling - she said she wasn't interested, and planned on renting it out in a few months for the upcoming school year. This was 10 months ago, and the place is still vacant.

The problem is, the owner is an old Italian woman and has no clue what kind of shape this place is in....she thinks its a palace. I walked through it and it needed a lot of work...I'm estimating about 12,000-15,000 (and that's doing the work by myself/with my dad). I want to call her and propose the following deal...but I would like to know what you guys think about this, and listen to your suggestions/opinions. Thanks a lot!

Lease Option Offer Information

I would like to lease to own this property via the following lease option agreement.

I sign a 36 month lease with the owner for $1500/month plus $8000 cash up front ($3000 for first and last months rent + $5000 fee/deposit).

This is conditional upon;

• Permission from owner to renovate and improve property
• Permission from owner to sublet/sublease the property

Other Conditions/Specifics

I have the option to purchase the property at any time after the first 12 months of our agreement and before the end of the 36th month. During this time period, no other buyers have the right to purchase this property.

Purchase Price = *$180,000

Over the course of the lease, 50% of my monthly rent payments will count as a credit towards the final purchase price. For example, if in the 30th month I decide to exercise my option to purchase the property, the purchase price would be $180,000 less 50% of the previous 29 monthly payments at $1500 (29 payments x $1500 x .50 = $21,750). $180,000 - $21,750 = the new purchase price of $158,250.

The owner pays property taxes throughout the term of the lease
The tenant pays utility costs throughout the term of the lease
Maintenance and repair costs will be equally shared between owner and lessee (me)

*According to the city’s website, the owner was paying property taxes based on an assessed value of $213,000. The interior of the property is in terrible condition and would not have been considered in this calculation. The last time I saw the place it was vacant with no locks on the doors.

Financing

I plan on borrowing $30,000 from my Uncle. $8,000 will be given to the current owner right away, and approximately $15,000 will be used to renovate, update etc ($7000 left). The remaining money will then be invested in coin operated laundry machines which will be placed in the basement of the property. The $4000-$5000 that is left over will be saved for emergency expenses.

Projected Income

IN 2, 3bdrm apartments = 6 tenants @ $500/month = $36,000/year
OUT $1500/month paid to current owner = $18,000/yr

BALANCE =$18,000/year
OUT (to me in form of monthly cash flows) = $5,400/year
$450 x 12 = $5400

BALANCE >$12,600/year<

This amount will be used to pay off initial $30,000 loan. Over the course of three years this totals $37,800 ($12,600 x 3), providing a 26% return on investment.