2 L/O questions - Posted by JB in MD

Posted by WilliamGA on May 30, 2000 at 24:17:53:


  1. You should keep some reserves in the bank to cover unforseen expenses. How much you keep would be left up to what makes you feel comfortable. I would say at least a couple of months rent payments in case the T/B skips out on you as this will most likely be where the need for the cash comes from as you would have to cover your pmt to your seller during this time.

  2. Yes, your option period from your seller needs to be longer than the option period you give your buyer. This will be covered by getting an option period from your seller with automatic rights to renew in the contract. I would never L/O a property for less than a total of 3 yrs right to option. Thats one 1 yr term with an additional 2 rights to renew. That way, you are covered.

Hope this was of help.


2 L/O questions - Posted by JB in MD

Posted by JB in MD on May 29, 2000 at 22:04:12:

Hi all,
2 questions:

  1. When you do a L/O, what percentage (if any) of the ‘option consideration’ do you put in the bank to cover incidentals like vacancy, repairs you agree to, insurance, etc.? Since I am just starting, I believe the best idea to be to get maybe 10k or so in the bank to cover anything that I may mess up in the beginning. I know many of you would never consider putting your money in the bank, but I will need liquidity should something unforeseen occur. After I have the 10k, should I still be retaining a portion of each deal? Also, does anyone figure the income tax on that intial money and set that aside in a tax account, then take out a portion for incidentals, then take what is left over?

  2. My contract (L/O) with the seller should be for a longer period than my contract with my T/B’er, right? Why? How do you structure the dates on the two contracts?

As always, any help is appreciated!

God bless,