How to structure this offer, Is there a deal here?

[Patrick Martinez]

I found a home that is FSBO. Comps show it is worth about $400K sellers will accept $330k, needs about $10k in repairs as it was a prior rental and some remodeling was in progress but the owner passed away. It is vacant and they are absentee owners and they do not want the house. Here is the kicker, the heirs want to do a lease with option to buy as they can't sell the house until it goes through probate. They also want 10% down for the option.

Questions; Is this a reasonable down payment request? Can they put it into a lease with option to buy if it is probate? Is it possible the probate could be dragged out if a relative or other party lays claim to part of the estate?

The plan was to tie up the proerty for 12-24 months(negotiable), finish repairs and rent for market rate(which would cover mtg paymnets) and create a small cash flow until the home comes out of probate. Than either purchase outright at the agreed upon price or sell to another investor. Ho wwould you write the offer?
I am a former realtor but a newbie with the investment side. Any help will be appreciated.

[Brian Gibbons]

Originally posted by Brandon Turner:

Hey Patrick Martinez - interesting problem. I see the potential there - especially if you can wrangle in a lease-option sandwich of sorts. I'm not too sure on the Probate part of it, but perhaps Sharon Vornholt might know? Also - I know Brian Gibbons knows a lot about lease options so I'll drag him into the conversation as well :)

My thoughts though - I would think that tying the property up for as long as possible would be best. Also - 10% seems like a REALLY risky amount for this. I mean, thats 30k. Granted, you have the potential for making a decent amount (if your market is good and can sell) but I'm reluctant to tie up that much money. They are the ones, it seems, in a rough spot. Maybe a few thousand, but 30k seems steep.

Additionally, I wouldn't want them holding my money. I wouldn't trust them with that much, especially when you don't know how the probate thing would work out. But again - I'm not the pro on that. Maybe someone else would have more insight?

Thanks!

Probate makes it not easy to do options, but you can try.

An Equity Split may work:

1. You lease and option with the ability to assign and sublease.
2. You exercise price is $330
3. You give the sellers an option to buy 50% of the equity for 10 dollars. That option is in escrow with the title clouded with a Memorandum.
4. You get $10K from a private lender IRA with a return of 50%, no payments until the property is sold. A lien is placed on the property to protect the private lender.

So you improve it, llease option from seller, and lease option to a strong tenant buyer for top sales price.

Pay the sales costs, and split the balance with the seller.

I think that is the a win win because probate does not care to improve the property for retail resale. Sellers get top sales price with no work. You make half the profits.

What do you think Brandon?

You may want to ask @John Jackson or @Bill Walston.

I still cant do that @ thing!