There are many ways you can buy properties and sell them for a profit and one of the biggest is buying a fixer property, fixing it up and selling it. But, you can even make more from the property if you sell it on a lease option.
I, myself, have just bought a fixer condo that in less than one year, with only about $5,000 in repairs, I will be able to lease option for a two year period and make close to a $35,000 profit.
This is how it works. First I am lease optioning the property with the right to fix it up and then purchase the property at a set price. The price is $17,000 less than current market value and then I will purchase the property on a traditional loan. Then, I can take out the equity and put a down payment on my next fixer. I also get all the tax benefits for the next two years while I am lease optioning it to someone else.
During that time I will be making $100 a month positive cash flow from the lease of the property, getting the mortgage deduction on my taxes, and then selling the property for $32,000 more than I bought it for at the end of the lease term. The $35,000 profit I plan to make on this property doesn't even include the tax deduction or if the buyers decide not to purchase the property at the end of the lease.
For more information on making money from lease option fixer properties, please feel free to contact me anytime.
Todd Clark and the Friendly Home Team
Knipe Realty
Todd@IFoundYourNewHome.com
Phone: (503)524-9494
Fax: (503)746-9573
I am a licensed Realtor who specializes in Washington County, Oregon and also work in both Clackamas and Multnomah Counties including the cities of Aloha, Beaverton, Canby, Clackamas, Gladstone, Gresham, Happy Valley, Hillsboro, Milwaukie, Oregon City, Sherwood and Tigard. All information contained in these posts are copyrighted and cannot be used without prior written approval authorization from the author me Todd Clark. If you are looking for an outstanding agent please give me a call I would love to help you with all your real estate needs.
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I'm not investor so please forgive me if I sound ignorant, I just have a couple of question. How will you sell the property for 32k more than you bought it for in two years? I know you paid 17k less than market because it is a fixer. Will the value go up another 15k in two years? You must be in a pretty brisk market! And you have to take out the $5k for repairs right? You get a tax write off but I'm also curious how much the yearly taxes are?
Sorry, just trying to work the math. Is this a win for the tenant too?
Wow, leave for a few hours and questions, questions, questions - lol
Marcus - Yes when I do a lease option all of their down payment and $100 of their monthly rent goes toward closing costs and down payment.
Randy - My wife says, you are going to give me an ego, cut it out - lol
Rita - Our market is still going up! I up the price 5% per year on the lease and I am making money every month on the lease above and beyond my mortgage. $12,000 profit after the fix ups, then $10,000 for each year on a two year lease equals $32,000. So, not counting the tax deduction, I'm making $100 a month from the lease option for two years, totaling $2,400. So actually making about $34,000.
Jeff - That 5% appricatation is actually low for the area, it is actually closer to 7.5% on condos and since this is a condo conversion project, we maybe even higher that the $12,000 profit at the end of the conversion. Last year we had a project start at $85,000 and by the time we got to the last unit they were selling for $135,000.
Wow Todd, I'm impressed. I can't even figure all of this stuff out, but I like it. Thanks for sharing your plan and your strategy. I'd have to really give this some heavy duty thought. We, too, typically appreciate 7-10%....don't know, though, when that will begin again after our crazy market in 2004-2005.
Teri,
If you start to have less appreciation, start to charge a larger down payment and collect a little more per month. Then it can still appraise and you make more monthly and if they don't exercise the option, you have made more from their larger down payment.
Todd,
I'm curious as to who is on title in this type of transaction, and whose name is the mortgage in?
Jared,
While I'm fixing up the property the seller is on title and I then refinance after the property is fixed up. Usually giving me 20% equity in the property making it so I a can avoid PMI. Then I lease option it to someone else for a period of two year. During that two years I am on the title until they exercises the option to purchase the property.
I have also used on the contract where it states who's name will appear on the title "Todd Clark or Assigns", If there is going to be an outright sale, instead of me lease optioning the property, I can avoid closing on the property myself and just assign the contract to the new buyer at a higher price and they close on the property and I get the difference between the two amounts.
Hope that answers your questions, if it doesn't feel free to give me a call.
Todd