We Buy Houses

Lease 2 Own Deal

Published: 11/28/2009 by Octavius Mosley

Hey guys....I'm BACK!!! Did you miss me? I know some of you are like....didn't know your were gone. That’s ok. I feel the love. I’ve been out and about leaning all I can about different ways of using the internet to market properties to sell. In my quest for learning I have met some interesting people that have very different views and ideas on what it takes to market a property in this Web 2.0 era. I will touch on those ideas in a later topic. What I rather do is share a deal with you. Is that ok? Cool!


Lease 2 Own House

Lease 2 Own House , Beautiful isn't? Well it actually is a beautiful home inside and out. I won't bore you with the details, unless you want to hear them.... OK OK if you insist.

4bedroom 3 Full bath
2800 sqft
built 2005
$1,450 monthly payments
lived in 6 months

Nothing wrong with the house. Seller was a don't wanter. He went through a divorce and a previous failed investor sell. The house was worth $373k and he owed $250k. He was willing to let I go for what he owes. Hmmmm, Great Deal or what? It gets better (actually worst then better). This property was in a declining market losing about $4,000 a month. Also the seller had a negative amortized loan on the property. That means the monthly payment was not covering the full principal amount. The principal was increasing by about $500 a month. So the house was losing about $4500 a month in equity. Still a good deal? Yes and here is why.

I found a tenant buyer to purchase the house for $319k on a 1 year Lease Option. Here is how it broke down:

Purchase price $319k (value after depreciation)
-48,000( $4,000 loss equity x 12 months )
-6,000 ( 500 x 12 months unpaid principal from neg-am loan)
---------------------------------------------------------------
-54,000 from $374k value equals $319k

OPTION Payment $11,000 in my pocket
( OPTION payment paid $3,000 down and 1,400 x 5months and 1,000 x 1month)

[Separate payment coming]

$1,450 per month for 1 year (covers my sellers mortgage payment)

Total made on this deal:
$11,000 option payment
$58,000 equity spread ( $319k-$11k=$308 $308k-250k (owed on mortgage)= $58,000)
---------------------------
$66,000 Profit

Not a bad deal.

10 OTHER INVESTORS WALKED AWAY FROM THIS DEAL. NO ONE COULD SEE THE POTENTIAL IN THE HOUSE. I DID. WILL YOU WALK AWAY FROM THE NEXT DIFFICULT DEAL? REMEMBER, IT'S ONLY DIFFICULT ON THE SURFACE. DIVE IN... FEET FIRST AND IT WILL GET MUCH EASIER!

Octavius Mosley