Town home lease option?

Question

hey guys have a question. Found an off-market property that landlord owns. It is a duplex townhome free and clear. Selling one side only.

Here is what it looks like

He wants full price at 110K which arv is around that. Said he would do a land contract or wrap around at 100K. Seems like he will finance most if not all.

Rents out for about 950.

And may want around 450-600 a monthly payments

It is tenant occupied. To me this may not make sense as a rental given 100 bucks cash flow for 45 minute drive. However great neighborhood

Any suggestions on how to go about this. Lease option after I acquire and mark up price?or owner finance to another person with a higher price and down payment?

Marvin McTaw · Answer

@Alexander Ramos if I were in your shoes, I would probably take the following steps

• Purchase & Sale Agreement: Get control of the house via a purchase and sale agreement that documents the Seller's willingness to provide seller financing at certain terms (e.g. payments, tenor, interest rate, etc.)
• Authority: Make sure you know what you're buying because it may not be possible to only buy one unit in the duplex townhome i.e. it may not be possible for the Seller to only sell one part of a duplex and not both units. For example, who covers costs for roof repairs? Who handles the yard and other landscaping things? Who has use of the backyard?  
• Inspection: get an inspection done of what you're buying to make sure there are no surprises. I want to be clear here and mean a full-on, specialist hired for the role. Not a simple walk through inspection that you do on your own.
• Your Game Plan: figure out what your game plane with the property is and how it will pay off for you. You'll also want to know your risks and mitigants for problems 
• Run Financial Models: you can run your potential rental property through the rental property calculator here on BP or your own financial models to see if it would work for you short and long term. One of the big benefits of the model is that it helps you to think about and consider costs you may not have accounted for e.g. vacancy, insurance, property management, etc.
• Sanity Check w/ Mentors: sanity check your game plan, financial model and deal with people who know what they're actually talking about to help you poke for holes and update 
• Validate Your Numbers: sanity checking with folks is the first hurdle but make sure you check on certain costs by calling and getting numbers specifically for your market and the situation
• Execute The Gameplan: if everything looks good, I'd maybe double check one last time but then move forward and execute the transaction

Ultimately you get to decide the best path to move forward. You can certainly do a lease option after you've bought the property but you've got other things you probably need to find out answers to first.

Depending on how you own it, you would probably be best served by keeping the half of the duplex as a rental property and not selling it via seller financing as you might trigger defaults or due on sale clauses in your seller financing. There are also advantages to you retaining ownership instead of providing the financing. Pros and cons to both though.

I hope it helps!