Wholesale Deal, Lots of Moving Pieces.. Involving Rent To Own

[Padric Lynch]

Situation: 

I have a tenant that approached me about getting out of a rent-to-own (RTO) lease. He has the option to purchase at $38,000, and each of his rent payments ($500) goes towards the purchase when/if they execute the contract. He has paid $4,000 towards it, but has also sunk about $20,000 into the house. The home needs some work, about $65,000, conservatively. The property's ARV is ~$155,000. The tenant's landlord is open to ending the RTO lease to sell it, but the tenant will have to be in agreement as well.

Before he agrees to get out of the RTO lease, the tenant wants the 20k he put into the house, the 4k he has paid towards his down payment, and some extra cash for moving costs and closing costs on another home. Approximately 25k.

My proposal: 

1. Put the property under contract at $30,000. The landlord/seller will have to acknowledge the tenant's $4,000 rental payments as payment towards the original purchase price, and they will have to come down another $4,000 on top of that. 

2. Assign the property for a $29,000 assignment fee, with $25,000 going to the tenant and $4,000 to me. The tenant and I will have to be the assignors unless there is a better way (let me know!). Overall the Buyer will need to bring 59k to the closing table.

3. 155k ARV - 65k Rehab = 90k / 90k - 59k = 31k estimated gross profit. I will be in the profit range of the cash buyers I typically use.

I think I will be able to create all the documents and receive all of the legal verbiage needed from my lawyer to clearly articulate the agreements being made between the tenant, seller/landlord, and myself. Please let me know if there is anything that I am not considering that I ought to be!

Thanks,

Padric