$700 a month, a $45,000 price, no bank in the middle
A $500-a-month tenant in Girard now holds a fixed $45,000 price on the house. No bank is in the middle of it.
We bought the house in August for $23,000, the price plus the wholesaler's fee. It was built in 1920 and had a tenant renting month-to-month from the previous owner. Instead of a new landlord, we offered him a three-year lease option: $700 a month, $2,000 in option money, and a $45,000 purchase price that does not move for three years.
He read the lease closely and asked what the $700 and the $2,000 actually bought him, which is the right question. We walked him through it on a call, he signed that evening, and he met the notary the next day. The $500 security deposit he had with the old owner came to us at closing, so we applied it to his option money instead of holding it. The city wanted a $275 water deposit, and we paid it so he was not out that up front.
Here is why we buy houses like this on purpose. A bank does not want to write a $45,000 mortgage; the loan is too small to be worth its time. So a family that can afford $700 a month has no path to owning a house at that price through a lender. A lease option with the price written in gives them one.
For us, taxes run $493 a year and there is no mortgage on the house, so most of the $700 is income. He has already asked more than once about moving to a land contract. The answer is to live in it a year first, then talk.
One question, and one line is enough. The money you would lend from, where is it sitting today? An old 401(k), a savings account, a brokerage account, something else. Hit reply and tell me. I answer these myself, and the answers decide what I write about next.
As promised, income over wealth in under a minute.
- Dan
We bought the house in August for $23,000, the price plus the wholesaler's fee. It was built in 1920 and had a tenant renting month-to-month from the previous owner. Instead of a new landlord, we offered him a three-year lease option: $700 a month, $2,000 in option money, and a $45,000 purchase price that does not move for three years.
He read the lease closely and asked what the $700 and the $2,000 actually bought him, which is the right question. We walked him through it on a call, he signed that evening, and he met the notary the next day. The $500 security deposit he had with the old owner came to us at closing, so we applied it to his option money instead of holding it. The city wanted a $275 water deposit, and we paid it so he was not out that up front.
Here is why we buy houses like this on purpose. A bank does not want to write a $45,000 mortgage; the loan is too small to be worth its time. So a family that can afford $700 a month has no path to owning a house at that price through a lender. A lease option with the price written in gives them one.
For us, taxes run $493 a year and there is no mortgage on the house, so most of the $700 is income. He has already asked more than once about moving to a land contract. The answer is to live in it a year first, then talk.
One question, and one line is enough. The money you would lend from, where is it sitting today? An old 401(k), a savings account, a brokerage account, something else. Hit reply and tell me. I answer these myself, and the answers decide what I write about next.
As promised, income over wealth in under a minute.
- Dan