First Option Deal

[Itstimetoinvest]

I have the potential to put together an option on a property in Okotoks Alberta, a smaller town outside of Calgary. The option would be $1000.00 on a six month option for a $345,000 detach. The seller`s main concern is to get his equity out which would put him right on market or slightly above/below market right now but with the current up swing I could stand to make anywhere from 15,000 - 25,000 on the deal in the spring. Anyone have any input? Does it sound like a good deal to you, any input would be appreciated. (Rookie at this but gotta start somewhere). Anyone have any experience with Okotoks?

 

[gwasser]

QUOTE (Itstimetoinvest @ Oct 4 2009, 01:12 PM) I have the potential to put together an option on a property in Okotoks Alberta, a smaller town outside of Calgary. The option would be $1000.00 on a six month option for a $345,000 detach. The seller`s main concern is to get his equity out which would put him right on market or slightly above/below market right now but with the current up swing I could stand to make anywhere from 15,000 - 25,000 on the deal in the spring. Anyone have any input? Does it sound like a good deal to you, any input would be appreciated. (Rookie at this but gotta start somewhere). Anyone have any experience with Okotoks?


I understand that a very large number of properties listed "for sale by owner" do not sell and end up with a realtor. So I would ask myself, am I going to sell this place by myself? If not how much are sales commissions and legal costs?

Hope this helps.

 

[invst4profit]

You can definitely expect resale costs to eat up far more than $15,000.
With a deal like this you should be looking to buy 20-30% below market if you wish to make a quick turn around profit.
You are looking for a desperate seller not someone looking to get out without a loss.

 

[RedlineBrett]

QUOTE (Itstimetoinvest @ Oct 4 2009, 01:12 PM) I have the potential to put together an option on a property in Okotoks Alberta, a smaller town outside of Calgary. The option would be $1000.00 on a six month option for a $345,000 detach. The seller`s main concern is to get his equity out which would put him right on market or slightly above/below market right now but with the current up swing I could stand to make anywhere from 15,000 - 25,000 on the deal in the spring. Anyone have any input? Does it sound like a good deal to you, any input would be appreciated. (Rookie at this but gotta start somewhere). Anyone have any experience with Okotoks?

Sounds to me like you`re betting $1,000 that this property will be worth more in the spring than it is now. That is called real estate gambling, not investing.

Might be right but if you`re talking 15-20k it`s too close to call.

Spend that $1,000 on educating yourself and you`ll get a much higher return out of it.

 

[Itstimetoinvest]

QUOTE (RedlineBrett @ Oct 5 2009, 09:54 AM) Sounds to me like you`re betting $1,000 that this property will be worth more in the spring than it is now. That is called real estate gambling, not investing.

Might be right but if you`re talking 15-20k it`s too close to call.

Spend that $1,000 on educating yourself and you`ll get a much higher return out of it.

Correct me if I am wrong but I believe this is an option on real estate. I spend nothing unless the option does not get exercised, when it does all that is done is collect the difference between the purchase prices less closing costs.

 

[RedlineBrett]

QUOTE (Itstimetoinvest @ Oct 6 2009, 10:43 AM) Correct me if I am wrong but I believe this is an option on real estate. I spend nothing unless the option does not get exercised, when it does all that is done is collect the difference between the purchase prices less closing costs.

You`re trying to do a sandwich option.

So you would have to find a buyer for the property for more than what you`re agreeing to pay in the option. If you don`t you`re out 1000.

If you do it has to be for enough to cover your closing costs... which will be significant as you may have to do interim financing yourself before you gain control of title and sell to your new buyer.

If you try and set up a deal between the buyer and seller you are holding yourself out as someone that is trading in real estate on behalf of someone else without a license while also taking a `net commission` (difference in sale prices). Both of which are illegal under the Alberta Real Estate Act.