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Craig

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Clarification before I jump off the roof, please.  It won't kill me (it's only one story), but it's gonna hurt like hell, I'm sure.

Oops, that was a typo! No need to jump! Should have been $110k assuming his market can support it. Current market value, not what the seller is asking (unless it's less), is where you've gotta start. So, CMV + anticipated appreciation + more if market conditions allow = purchase price on the option.

 

Kim, checking for typos...

...it's not so bad when I mipsell a word you figure it out, but I get one digit off numerically and geesh! I'm going to hide now... :ph34r:

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MC says:

JC, as for the CA deal, you will market the property at the highest price your due diligence indicates is acceptable by the marketplace. Then, you work backwards from there, deducting the rent credits you are offering, and the option consideration you estimate you'll receive. This is the net price to the seller that I emphasize. Almost without exception this will be many thousands more what the seller can expect to net if selling in a traditional manner.

 

All of the numbers: gross selling price, rent, rent credits, option consideration, and net sales price are all known before hand. Signing the paperwork when we meet is simply a formality.

 

 

In an effort to be certain about what to show a seller, here are 2 sets of numbers for a deal. Which do we show the seller? (all numbers are fictional, for now)

 

Traditional #'s/ LPA #'s

 

Asking Price $235,000.00 / $258,500.00

 

Realtor's Fee (6%) ($14,100.00)/ $0.00

 

Closing Costs (3%) ($7,050.00)/ $0.00

 

Mortgage (PITI) $1,400.00 / 1,600.00

 

Holding Costs (Mortgage) While Unsold:

 

6 months ($8,400.00)/ ($8,400.00)

 

3 months ($4,200.00)/ ($4,200.00)

 

Total Costs to Sell Your Home

AT LEAST: ($25,350.00)/ ($8400.00) <----at the MOST

 

Sale Price (assuming full asking price)$235,000.00 / $258,500.00

 

Minus Costs to Sell ($25,350.00)/ ($8,400.00)

 

SubTotal $209,650.00 / $250,100.00

Minus Underlying Mortgage $205,950.00 / $205,950.00

 

= Profit $3,700.00 / $44,150.00

 

You NET this much EXTRA with the Lease Purchase Advantage !: $40,450.00

 

Naturally, you have to still subtract the Option Consideration and any rent creditsyou've figured to come up with the true NET.

 

Do I show him the higher (blue) numbers including what I am GOING TO BE selling the house for a year down the road?

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Wow Rich! That's a lot of detail. Too much I think. The seller will probably have spoke with a Realtor, who will have given an estimated net. Then the seller probably figured their net fsbo by adding by in the realtor's commission. (Those figures won't include holding costs.)

 

Know the figures, but don't give the seller so much info. Emphasize the net and that the tenant/buyer is responsible for maintenace, all closing costs, and that there is no re commission. Give the net, emphasize the net, keep it simple.

 

Asking Price $235,000.00 / $258,500.00

CA? What's the term? What's appreciation? Will your market support this difference? Mine would not, but I'm not remembering where you are. If it will, go for it they'll do a whole lot better with you!

 

Kim

 

P.S. Why is the mortgage more on the LO?

Mortgage (PITI) $1,400.00 / 1,600.00

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Kim,

 

Yeah, it's a lot of figures and it's mostly for my own benefit.

 

Appreciation here, by the way is around 20% (S. Florida) and I gave a conservative 10% in the example. Term of 1 year.

 

CA = yes. Different mortgage a mistake (typo) I guess.

 

So, basically, in a CA I do NOT need to discuss what I'll be selling the house for (the 10% increase), right? If I emphasize the fact that they are going to net more at the end and have no closing costs and their maintenance is all taken care of....that's all they really need to know.

 

Am I on the right path?

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Rich,

Appreciation here, by the way is around 20% (S. Florida) and I gave a conservative 10% in the example.

I'm green with envy! We're at about 5.5%.

 

Different mortgage a mistake (typo) I guess.

Guess that means your human!

 

So, basically, in a CA I do NOT need to discuss what I'll be selling the house for (the 10% increase), right? If I emphasize the fact that they are going to net more at the end and have no closing costs and their maintenance is all taken care of....that's all they really need to know.

The purchase price/strike price on the option will come up. After all, you're going to be filling in that blank, and they have to sign the Option. My point was really just to keep it simple -- don't overwhelm them with details, they'll get confused and say, "No!"

 

Your right emphasize the Net, no closing costs, tenant/buyer's responsibility for maintenance, no realtor commissions, your fee paid by the tenant/buyer and ALL THEY'LL CARE ABOUT is that they're making more money than they thought possible and it'll be taken care of in 2-4 weeks (give or take).

 

Kim

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ALL THEY'LL CARE ABOUT is that they're making more money than they thought possible and it'll be taken care of in 2-4 weeks (give or take).

 

 

My question is this,

 

If the standard time to fill a property with a t/b is within a month, would the seller be more comfortable and more likely to sign a deal if you start the lease 5 - 6 weeks from the date the contract is signed, or even 3 weeks :D . I see the recommended time to start the lease is 2 - 3 months, this seems like a long time to tie up the seller, although a Mem. of Agreement isn't filed and they can exercise other options, or maybe they can't, I don't know, I guess what I am trying to say is... If I am doing a CA and the seller wants/needs the lease to start in 3 weeks, should I sign the deal or not?

 

I know I'm rambling here, but any thoughts will be appreciated.

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If I am doing a CA and the seller wants/needs the lease to start in 3 weeks, should I sign the deal or not?

Sure you can do a CA for 30 days and have a good chance of filling it in that time frame, esp. if you market it agressively. 60 days is better than 30 days for YOU! I've suggested 60-90 because of the holidays. If a seller is motivated enough to do a sandwich lease that gives you enough profit to justify the deal, then they'll be motivated enough to give you 60-90 days.

 

If a deal had to be done in 3 weeks? Market heavily for buyers and it could be done.

 

Kim

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Today actions.

 

I just completed my first short offer agreement to be faxed to the realtor. Am I nervous or what but its done.

 

Also I used my spreadsheet which I have created to run all the numbers in a deal. I found it really helpfull. I can add to the spreadsheet in time. It works great and rather simple to understand.

 

Anyways I had to tell you folks I took the first step of many. And I am sure I will trip a few times, lots of times... Only if I could have a mentor for all my trips...

 

I would like to thank everyone for all the DUMB questions I received answers to. Everyone was so kind and helpfull as dumb as they were.

 

Thursday its back to calling and working the other deal in the fire.

 

Thanks again

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Well, then, they should be motivated.  There's nothing like payments on a vacant property to light a fire under a homeowner.  What's the latest, Craig?  And keep in mind that the more time that passes from the initial contact until the paperwork is finalized, the greater the likelihood that something can and will squash the deal.  Can you get an offer in their hands?

 

 

I sent my short offer in this morning just waiting to hear if with will except the offer. The realtor was very receptive to this idea and maybe we can work some other deals.

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Craig,

 

How is everybody making money on this deal?

 

Is the realtor willing to take a cut in her commission by working with you? How do the numbers stack up, here?

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Dear Dairy...

 

Short offer went in today with a 48 hour offer. The agent had to mail the offer to the owner. The owner wants to review the offer with his lawyer. That sucks my motivation is going down too. Blows that 48 hour clause.

 

Can't the owner add? One hell of a deal.. You are going to NET more than if you held it until next summer and tried to sell it. Whats the questions a...h...

 

Wait until he gets the long form. HUMM If he has to review that with his lawyer I am going to charge him buy the hour too. Damn Lawyers got to love them but we all hate them too.

 

:huh:

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