jamico 0 Report post Posted July 19, 2009 2/1 SFH, possible 3/2, 1200sf, owner moved out west , been on MLS over 1 year, he started remodeling for a 2nd bath, gave up after demo and plumbing rough. I have baited and received plenty of interest but it's not ready for occupancy, Seller indicates lack of money to complete. I'm a licensed general contractor who does remodeling, but uncomfortable about putting money into completing and risking not getting paid for work if everything doesn't materialize. What should I consider in putting deal together. Help appreciated. Share this post Link to post Share on other sites
MichaelC 160 Report post Posted July 20, 2009 Hello, John, and welcome to The Naked Investor!Your concerns about making repairs to a property where you are not yet on title are certainly valid. Worst case scenario is you lease the property with an option to purchase. You go in, make the repairs with your money, labor and time, and then for some reason you're unable to exercise the option. You're out with no recourse. As I said, that's the worse case scenario, and one which every one will tell you never to do. But, we are all aware that there are exceptions to every rule. And this may be one of those exceptions.Over the years I have done a number of lease option fixers. Sure, it's a risk, but one I'm willing to take depending upon the property, the terms, and current market conditions. Here's an example:While living in Albuquerque years back, I located a fixer and a homeowner with no more love for her house. I offered her an acceptable price and rent and asked for a one year option. She wouldn't go more than six months. I accepted and the deal was done. Brought in a couple of guys to replace the roof, paint, ceiling repair, etc. In three weeks we had the house ready to go and it was back on the market. Three months later I sold it for a nice profit. My back up plan was to be prepared to buy the house outright if need be and then rent it out.So with this in mind, if you have a back up plan in place, your risk is minimal. Run the numbers for market value and rents, figure out what your repair costs will be, and make your offer. The key numbers are your purchase price, your future selling price after repairs, your monthly payment to the homeowner, and the length of the lease, (the longer the better, of course). Share this post Link to post Share on other sites
jamico 0 Report post Posted July 21, 2009 Michael, Thanks for your reply and advice. Since I happened upon your name a few days ago, I've spend time reading your forum archives as well as research reviews. I like your knowledge, wit, and attitude about helping your students. Therefore I have decided to order your manual and study it. Not doubting that I will not like it, I will commit my efforts to following your program. Although I have been a member of my local REIA in northeast Florida for 3 years and getting an education, I have purchased only 1 rental. It is finally cashflowing with good tenants, I have tied up too much of my money and time with it and that has hindered me from furthering my REI goals. I believe your LO strategy is a winner, especially in today's market, and I think that being a licensed general contractor with career experiences in most types of construction will benefit me. So as I fight Analysis Paralysis I look forward to getting my REI business GOING and becoming one of your success stories. I expect that ya'll will be hearing from me in the future. Meanwhile if I can be of assistance with your construction questions I will be glad to try. John Share this post Link to post Share on other sites
MichaelC 160 Report post Posted July 21, 2009 Thank you, John. Appreciate your kind words and your willingness to share your area of expertise here. Share this post Link to post Share on other sites
Guest jvmccall Report post Posted August 2, 2009 2/1 SFH, possible 3/2, 1200sf, owner moved out west , been on MLS over 1 year, he started remodeling for a 2nd bath, gave up after demo and plumbing rough. I have baited and received plenty of interest but it's not ready for occupancy, Seller indicates lack of money to complete. I'm a licensed general contractor who does remodeling, but uncomfortable about putting money into completing and risking not getting paid for work if everything doesn't materialize. What should I consider in putting deal together. Help appreciated.I've advertised several homes as "Handyman special / Work for Equity Rent to Own". Give the tenant-buyer a credit at closing if they do the work you have detailed in the lease opoon agreement. Make sure they do the work before they move in. You might consider buying the materials for them. Make sure they still put some money down and you charge them rent while they are doing the rehab. You want to get it done as quickly as possible. I have had good success with this strategy. You can use this strategy in a SLO or CA. Share this post Link to post Share on other sites
