Q. Sellers want to sell their house 3BR, 21/2BA, no garage for $100K, Tax value: #118.5K, Comps: $107K,$ 115.9 & $134.9(last two comes w/attached 2 car garage). Mortgage Bal: $88K, PITI: $1100. I can easily do a LO for $120K current market, but the PITI is too high. Probably the feasible rent is

$900 max. The sellers refinance their prop. 2 yrs. ago for @8% & 15yr. term. Currently, they are repainting the interior of the house. I was able to talk to them about LO, had explain to them the benefits and they kinda agree with it. I did not discuss about the price and anything bec. I was

concern about the high mortgage payment. The reason for their selling is that their current job is about over an hour drive (back & forth) and

that their families live in the other end of the town. They hope that they could sell their house and buy another one. I showed them the comps. in the neighborhood and I told them that it will be hard to sell for that price, but I could offer them close or more to their asking price if they allow me to do a LO.


Q. What is the first and second strategy for this deal?


A. This one is tough because of the high monthly payment. A 15 year mortgage works great for people who are trying to pay off their house. It does not work well if you are attempting to maximize positive cash flow.


Lease option is not my first or second option when I am purchasing a home. In fact, lease option is usually one of my last choices. If I like the deal and the numbers work, I would rather go ahead and purchase the property.


Personally, I do not see many options that I would pursue on this deal but I do have a few possibilities.


1. If I could purchase the property subject to the existing loan balance with little or no money out of my pocket, I might overlook the negative cash flow. I would pay them $88,000 and that would allow for some negative cash flow. I may also consider paying them a little bit of money when I sold the property.


2. If the market is somewhat strong, I may consider getting an option on the property and selling the property for cash. They would continue making the payments until I sold it and the property would need to be in good condition. An auction may be a possibility using this strategy.


3. You could have them refinance with a 30 year note or ARM that would lower the payments. You could then purchase the property subject to and have a positive cash flow. Use caution on your lease option offers. It sounds as if you are offering full price. Make sure you give yourself a healthy cushion on all purchases. It also sounds as if you are quick to offer the lease option as a purchase strategy. Only use the lease option if other purchase strategies are not acceptable to the seller. My experience has been that sellers will usually accept the subject to and therefore I can go ahead and control the property by having the deed.