Posted by jack E on July 04, 2008 at 16:00:30:
In Reply to: Questions for all the Lease option experts.... posted by Larry Morrow on April 26, 2008 at 08:44:06:
You will notice that you are not getting any answers? I believe the reason is that the question as you posed it, indicates that you probably know little about any type of investing? If I am wrong please accept my appologies. That certainly is not a good reason not to answer you on this site.
Lease Optioning is a complicated subject. You first need to know almost for certain what the house is worth. Not what someone says it is worth, but based upon comparable sales in the last six months in the immediate area based on bed and bath and sq ft and if you are in a down market, a good estimate of what it will be worth six months or a year or two years from now. A good and I emphasize good Realtor can help you with this, but certainly do not believe everything a Realtor says. There are other sources. Then you have to have a very good handle on how much rent it will bring in, using actual rents in the immediate area for a comprable bed and bath room and sq ft house.
Then you must find out how much the owner expects for total price and what are his payments on the loan or loans on the property and therefore what he is the minimum he is likely to expect in lease payments.
Then you must compare that against how much positive cash flow you are likely to make on the difference between what you will have to pay in lease payments and how much you will be getting from the end buyer in lease payments. Then you need to determine how much you are likely to make on the back in, in the difference between the total price you are going to agree with the owner today, less any repairs you have to do, closing costs etc. and the total price you are likely to receive when he picks up the option. This is all much easier in a rising market but difficult in a decending market.
As you can see, it is not as easy as it first sounds. But all this information is usually readily available. It takes some work, but any thing worth while does.
If you are really serious in trying to make it in R.E. investing you will take the time to learn what it takes. You can do most of it right here on this site or at your local REIA. Read every thing you can including all the articles on this site(more than once) and several free books you can get at the library. If you thought it was a get rich quick scheme and do not wish to do the work necessary then save yourself time and money and get out now. I hope you don't and have the strong determination to do it. Either way it is up to you.