Seller Has No Mortgage

[news754 0]

Hi All

 

I spoke to a FSBO my first one the other day.

 

I try to explain the lease option to him and he ask me some question like.

 

If I have no mortgage how do I get the going rental for the area?

 

Why should I lose money on the rental?

 

I answered the other question to the best of my ability except these stop me in my tracks.

 

Thank you

Dean

[Gary (MO) 0]

Hi Dean,

 

Rental ranges can easily be obtained in your area by looking at the "For Rent" ads in the paper; notice how much and for how many bedrooms. You can also call "For Rent By Owner" from yard signs (if your area is like mine there are many to choose from) and inquire accordingly. It won't take you too long to arrive at a good "feel" for the rental prices for your area.

 

You will also need to determine fair market value for the property. If you have a realtor friend, you can have them run "comps" (comparing homes in that neighborhood that have similar characteristics - like #beds, #baths, squ ft, etc... - to give you a fairly accurate value of the property. If you have no realtor connections, there are several on-line services that may be of help to you.

 

Why? You will need to know how much the property is really worth to be able to buy(set your option price) and sell (if you're considering a sandwich lease) or to simply sell if you're working on a CA.

 

The seller shouldn't "lose money" if he rents it; in fact, you should be able to show him how you can sell his home for less and also collect more per month as a lease than a rental would bring - along with all of the other benefits of leasing to a bona fide T/B (as opposed to a transient renter).

 

You know, you might be money ahead to purchase Michael's Manual ($97) which goes into detail about all of this - and more - plus he sends you the appropriate contracts you need to make it happen in a "real life" situation!

 

Hope this helps!

 

Gary

[MichaelC 160]

Dean, you need to explain to a homeowner that their monthly payment has no determination in how much the property will rent for. If his payment is unusually low for some reason, the rent collected will not be low, also. And if the financing is lousy and the monthly nut is extreme, he may very well be facing a negative cash flow. Again, monthly obligations do not detemine what a property will rent for.

As for the owner "losing" money on the rental, I don't know what he meant by that. If it ties into his thinking that the rent equals his monthly payment, that would explain it. But now you know that isn't so. Be certain the homeowner does, too.