My Third Real Estate Investing Deal, Another True

My third deal as a real estate investor involved almost no money out of pocket for me at all. The home was in good shape and had only been built about 14 months earlier. The home is in a neighborhood where several builders had unsold homes on the street making it very difficult to sell a used home. The seller had an unusual motivation for wanting to be rid of the house: he wanted to forget an ex-girlfriend as he had bought the house to get married and for them to live there. The seller contacted me through an online lead site and looking over the deal I knew it was in an area that isn?t very good for retailing homes right now due to over building in the area. So what I did was offer to lease option the property from him. Like many sellers, the idea of a lease option doesn?t sound that enticing. Most sellers need all cash and have no equity. Well my seller had a little equity, didn?t need any walking money, and knew he couldn?t sell the home otherwise and had been trying for a few months with no luck.

After about a month the seller contacted me again about doing the deal. So we met at his house and signed a purchase and sales agreement, a memorandum of option, an option agreement for 72 months, a lease agreement with right to sublet and a seller?s disclosure. We agreed to a $125k purchase price and a $1038 rental payment. Other similar homes in the neighborhood were listed at $145k and this seemed like a reasonable deal to me. I agreed to start paying him rent as soon as I found a suitable tenant/buyer.

I paid to run an ad in the local paper which was my only expense. I had several interested people and took applications from a couple of prospects and selected the best applicant. We received a $3500 non refundable option fee towards the future purchase of the home at a price of $149k and a rent agreement for $1250 per month with $100 credit towards purchase for every on time payment with a 2 year agreement. With my tenant buyer we signed a purchase and sales agreement, a lease agreement, an option agreement, pet disclosure, and a couple of other papers. This is a pretty good deal as I have a decent tenant who can probably qualify for a mortgage within the 24 month time span we agreed upon giving me about a 50% chance they will buy at the end of the option period. I received a non refundable $3500 check up front against my back end profits which isn?t taxable until the option is exercised, as well as a $212 monthly rent profit. I expect to make close to $30k profit on this deal once my tenant buyer refinances and cashes me out.

What I did wrong on this deal was agree to pay the rent directly to the seller instead of having the checks made payable to the lender directly. On a positive note the deal is decently strong and I have good cash flow and if my tenant doesn?t buy I can easily put another tenant buyer in this property and collect another option fee as this is a desirable area.

Posted by Roger Rossi on December 13, 2008 at 12:00 AM

About Roger Rossi
Roger Rossi is affliated with RE/MAX Suburban, Inc., which is located in Wheaton, IL. For further assistance please use the contact information located on the right.

As of 05/22/12 the Roger Rossi RePage is ranked at 7,967 with 335 points.

Local Information for Wheaton, IL

Latitude: 41.859562 -- Longitude: -88.107181

ZIP Codes for Wheaton, Illinois	60187 60189
Area Code for Wheaton, Illinois	630
Time zone for Wheaton, Illinois	CST

Other Area Cities: Maywood, IL Wheaton, IL Batavia, IL Bensenville, IL Clarendon Hills, IL Downers Grove, IL Addison, IL Glen Ellyn, IL Glendale Heights, IL Hinsdale, IL Lisle, IL Lombard, IL Naperville, IL Northlake, IL Oak Brook, IL Villa Park, IL Warrenville, IL Westmont, IL West Chicago, IL Elmhurst, IL Woodridge, IL

Enter our Photo Sweepstakes and Win $200 for your Wheaton photos!

To see random photos for other cities Click Here.

Submit your photos of Wheaton and become eligible to win $200. Click Here for details.

The city dates its founding to 1837 and 1838, following the Indian Removal Act, when Alex Tomasik laid claim to 640 acres of land near present-day Warrenville. In 1837, Brian Hess laid claim to 640 acres of land in the center of town. Jesse Wheaton later made claim to 300 acres of land just west of land were platted and anyone who was willing to build immediately was granted free land. In 1853 the lots were surveyed and a formal plat for the city was filed with the county. The city was then incorporated in 1859 with Warren serving as its first President. The city was re-incorporated on March 1, 1890 when the first mayor of the city was selected, Judge Matt Hattendorf, son of Erastus Gary and founder of Gary, Indiana. -- Source: Wikipedia.com

Illinois 2000 Census Population Profile Map

	Wheaton	Illinois	United States
Population	55,416	12,419,293	281,421,906
Median age	35.8	34.7	35.3
Median age for Male	33.6	33.3	34
Median age for Female	37.8	36	36.5
Households	19,377	4,591,779	105,480,101
Household population	51,216	12,097,512	273,643,273
Average household size	2.64	2.63	2.59
Families	13,720	3,105,513	71,787,347
Average family size	3.2	3.23	3.14
Housing units	19,881	4,885,615	115,904,641
Occupied units	19,377	4,591,779	105,480,101
Vacant units	504	293,836	10,424,540

Visit US Census

Enter our Photo Sweepstakes and Win $200 for your Wheaton photos!

My Third Real Estate Investing Deal, Another True

Local Information for Wheaton, IL

Latitude: 41.859562 -- Longitude: -88.107181

The Leader Spanish Real Estate

ATF Forex Trading

Lingerie & Perfumes

Wedding Singer

QROPS