All Forum Posts by: Jesse T.

I would caution to evaluate each deal on it's individual merits vs. targeting a property simply because it falls in a certain area.  With any investing there is a balance between specializing and diversifying, to much focus on a particular area will expose you to unnecessary risk.  What if one or two of the major employers don't end up moving?  What if there are other job losses that offset the added jobs?  What if a big developer realizes it is a great area and builds a couple huge apartment building, but overbuilds?

As far as a down-payment, I would probably offer 10% and see what the owner says.  

Are you working with a realtor?  Make sure you find one that understands investing.  A couple places a realtor could help you would be expired listings and those that have not come on the market yet.

The challenges are going to be the challenges of most real estate investing - vacancies and transaction costs.  

The fatter the rent gap, the more cushion you have, but the harder it will be to convince an owner to agree to your deal.  Or if they give you a sweet deal on the monthly rent, they might push the option price so high you have very little speculative upside.  An owner could basically use you as a cheap property manager in that scenario.

A lease option is complicated, but if done correctly it can benefit all parties.  I would focus on making great deals - rather than trying to acquire an arbitrary number of properties.

For an option to buy to be profitable, it has to be significantly below the purchase price and you have to have the down payment to exercise the option - which would be 25% of the option price on most loans.

The margin is needed because you have realtor/marketing/carrying costs if you buy and flip.  If you don't have a significant margin, you might be better off looking at the market for better deals.

Seller financing is probably most likely to be a win-win situation where the owner is house rich, but doesn't have a particularly high income.  In that situation, the owner turns the asset that requires maintenance into an income stream.

With low interest rates available even for investment properties, seller financing isn't usually a huge incentive.

Have other units in the condo sold recently?  

Even if the Zillow price is low, it may be a challenge to get a buyer(especially an investor) to buy above that price.  If it is a good deal, but the buyer's price is still above the Zillow figure make sure you have a very strong explanation to support a higher price.

Generally you will need to put 25% down for an investment property.  Seller closing assistance seems to be limited to 2%.  If this ties up to much cash, look for a cheaper property(or better price).

In addition to the cash for acquisition, you also will need money for repairs and carrying costs until a renter is found.  While it may end up being more money than you want to have tied up, the cash should start coming back when you have a renter.

While there is the possibility of it working out well for everyone, I also see a lot of risk for you in the scenario.  One thing that concerns me is setting the exit price before anything is done.  It seems you could end up paying top dollar for low value upgrades.

In this plan, where is the agent getting commissions?  The initial purchase and a rental listing seem reasonable.  Getting two sales commissions does not.

I would check out both parties more in depth.  If the flipper needs capital, maybe partner on a flip(with you having significant upside on it), and use the rental option as a plan B exit strategy.

Learn as much as you can.  Search the forums for advice on investments that interest you.

Is rebating an option in your state?  If you are trying to attract buy/hold investors offering increasing rebates based on volume may be appealing.  

If you can't offer rebates on purchases, you might offer credits towards listing rentals.  In most cases you probably want to collect the coop half of the rental commission.  If you set the incentive right, you don't make much off the rentals, but you get an increasing amount of the investors business.  You also give yourself an inside track to get the sale listing down the road.