Hi BP'ers,
I've been reading Brandon's new No Money Down book and realized that I may have a deal unfolding right in front of my face. A friend of mine has been sprucing up his rural home to prepare it for sale for several months now. They built the home a little over 10 years ago so while they are anxious to down-size, get out of the Rural and get back to the Urban, they aren't really in a rush to sell. They own the place free and clear. They're are a little concerned that a realtor will want them to do even more work to get the place more marketable, and they are also concerned that, being rural, the place may sit on the market for awhile and it won't sell very quickly. They're pretty much done putting more effort into the place, they want to get out of it, but see the process of putting it on the market as a big effort and a drag on their current lifestyle and situation.
I first thought about this as a deal according to the screens of Equity & Motivation. The seller owns the place free and clear. So, there's definitely equity. The seller is motivated by wanting to get out of the place as it burdens their time and energy. The seller is also motivated in that they see the traditional home-sale route (through a realtor) may be even more of a burden for the reasons I described above.
Now, I am trying to decide if there is a deal here that pencils out in terms of a buy-and-hold strategy. Reading Brandon's book, particularly the part about Lease-Options and seller financing, told me that there may be opportunity here. IMO the place is basically rent ready; if it were going on the retail market, I would say it could use some updates to make it more marketable, but not for the rental market.
However, since the seller is expecting to sell it through a Realtor, I assume they want a Retail price for the property. The other challenge is that it is rural and I don't really have a feel or the data to know if there is a market for rural rentals. I think the property may appeal to a higher-end buyer because it is a very nice home on acreage with a view. So, perhaps a Lease-Option may work, but again, I don't know if there is such a customer base. These two concerns possibly make it a poor candidate in terms of cash flow.
Ha, now I have to figure out what to ask you smart people! I know you can't tell me if it'll cash flow without data and terms. My questions are more qualitative than quantitative anyway:
1. Are there typically buyers interested in Lease-Options for nice rural homes on acreage? Are they easy to find or am I going to have to become an expert marketer to become a successful lessor? BTW, I describe it as rural only because it is on a plot of a few acres and the nearby houses are all spread out. The property is only about 20-30 minutes drive from a major city who's RE market is in high demand.
2. What can I offer the seller besides that I am taking this burden off their hands? For example, If I do it as a Lease-Option or MLO where they still hold title and I pay them as a lessor and then rent or lease it to someone else, do I save the seller anything on their taxes because they don't have to sell the place? Any other benefits to the seller? I really like the idea of helping people with creative deals and want to do that here, too.
3. Are there challenges with owning and running rentals when the properties are rural that don't arise when the properties are closer into town either because of the typical clientele or otherwise? Is there additional (or less?) wear and tear typically? Should I assume more in my analysis assumptions for things like vacancy, repairs, etc.?
4. How do I start the conversation with this seller in turning their viewpoint from a Retail sale approach to the potential approach I described above? If I do it right and well, I may be able to define a sale price that pencils out in terms of cash-flow and, at the same time, gets them a price (or monthly payments) they are happy with, but not sure.
Sorry for the long post. Thanks for your help.
