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Newbie Lease Option question

Hi Newbie Lease Option question:

Buying Sub2 is always the best way to "buy" a property as long as cash flow is good.

Lease Option out as an exit strategy is always good if done correctly.

Finding Tenant Buyers FIRST (get a website just for Tenant Buyers) and go find a house they can afford (chicken and the egg dilemma) is my preferred approach. Make sure the Tenant Buyer understands you are providing a sevice: finding and negotiating a Rent to Own Home for them.

Notes:

* Major Move Times for families are around school changes: early June and late August.
* Your marketing should be heavy around April and July for the above reason.
* Interviewing Tenant Buyers should focus on home ownership, not cheap bargain rent.
* Tenant Buyers #1 Fear: What if I do not get a loan during my exercise period? (Solve that by offering one year extensions or seller financing if they fail at financing.)
* What if the property depreciates? Offer the average (at the time of exercise of option to buy) of 2 VALID CERTIFIED APPRAISALS. No one gets screwed with a bad deal.

In this crazy market,
** if you have 5 Tenant Buyers psyched and excited about the Rent to Own concept of buying a home today instead of renting, then
** you can go find the houses, buy them with either Sub2, Land Contract, Lease Purchase with sub-lease and sub-option provisions, or Cooperative Assignment (you Lease Option the house, then sell the agreement immediately for a fee).

Getting the Tenant Buyer FIRST makes much more sense. And they take marketing to get the right kind of Tenant Buyer: Attitude toward Home Ownership strong; low Debt to Earnings Ratio; willing to work on credit and increase income (2nd job, etc); paying for minor maintenance.

A good title for Tenant Buyers is: HOME OWNER IN TRAINING. :lol:

There is more info at http://www.LeasingToBuyUSA.com/

Wishing you all the best,

Brian, Trainer in Lease Options and Creative Financing

ROI questions

I would like some insight into calculating returns on real estate projects. I started investing several years ago in condos that rent out with a positive cash flow. I bought units that support higher prices post rehab because of what other upgraded units trade for in the building. I remember David Bach saying the beauty of real estate is the high ROIs because you generally put less down than if you were buying other investments, such as a stock. I've run general numbers on one of my units, and the potential ROI seems decent - - am I doing this right?

First the ROI calculation I'm using is:
ROI=((payback-investment)/investment) x 100

Here's the basics on the purchase of the condo
$300,000 purchase price
$15,000 down payment (closing costs picked up by seller)

Simple ROI Calculation #1 based on original investment
$400,000 sale price (based on upgraded comps)
- $20,000 commission
- $35,000 rehab/carrying costs during rehab
- $300,000 original price
= $45,000 profit payback

so, ROI = ((45,000 - 15,000)/15,000) x 100 = 200% return.

Or is it better to calculate based on all money I've put it:

$400,000
- $20,000 closing costs
- $300,000 original price
= $80,000 payback

$50,000 investment for down payment, rehab, carrying costs

ROI = ((80,000 - 50,000)/50,000) * 100 = 60%

Am I on track? (I've excluded taxes for 1031 reasons). I also know the condo market is sluggish, and this isn't something I plan on doing until that market gets some traction again. Thoughts?

New member in Gamecock Country sayin' hey

Hi Danielle,

Its nice to see someone from Columbia here on the fourms as well. I am originally from NE PA. My DH is orginally from here in the Columbia area, born and raised. I agree, the people are nice, the area is nice, cost of living, taxes, economy and all is nice too. After we sell our commercial property thast we own, we would both like to invest more in the RE market here in SC. Good luck to you!

Tiffany

Hello from Columbia SC area

Hello all. I am new to the fourms and joined this site in hopes to learn more about the commercial real estate market. I currently own commercial property and am looking for new ways to market it in hopes to sell soon (like everyone else I'm sure). :mrgreen:

I look forward to being a new member on this site!

Ready for a Deal Analysis

Gotcha Mike, Thanks!

Painting over scratches

I've been spackling for about 20 years now (yes, started at about 12) and just started using a new product by DAP called Fast 'N Final. It's a very lightweight spackle that looks kinda marshmallowy (no, don't taste it). I'm never buying standard spackling again. This stuff has no shrinkage as it dries (insert shrinkage joke here). It doesn't make any cracks when it dries. It dries fast and if you use a drywall taping knife to apply it and flatten the surface smooth - you don't need to sand it. Paints just fine too.