Re: ??? ABOUT A LEASE OPTION - Posted by JohnBoy
Posted by JohnBoy on April 17, 2002 at 22:46:28:
See my post on Getting Starting at this link. It gives you several ways to find motivated sellers.
http://www.creonline.com/wwwboard/messages/70929.html
Also see this link for a list of ways to find motivated sellers:
Re: On the subject of L/O - Posted by Rodd
Posted by Rodd on April 15, 2002 at 20:45:40:
Yeah, i think i brought up a good ? I appriciate all the information you guys are willing to help with, and one day after purchasing my homes, i will do the same for other investors looking to start.
Re: On the subject of L/O - Posted by JohnBoy
Posted by JohnBoy on April 15, 2002 at 15:01:16:
I’ve read somewhere before where someone was doing L/O’s where they are using purchase agreements, but I don’t recall off hand where I seen it. I “think” JimFL is using something like this with his his programs.
I personnally don’t care for it myself, but if its something that works for you then by all means keep doing it. As long as you are willing to give them the earnest money back then I don’t see any problem with it. I think Jim FL has his agreements state the earnest money is not refundable. But you would need to talk to him to get the details on what exactly he’s doing and how he’s wording things.
I prefer to get it all as option money with the exception of about $100 of it as a security deposit on the lease. That way it shows there is a security deposit apart from any option money to confuse anything about the option money being considered a security deposit.
If I used the money as earnest money that is refundable then in my mind that would give them more options to back out and find something better. I like to keep them more committed to following through by exercising the option so I get my money out of the deal.
In your case you are buying the properties and getting your own financing on them. So you don’t have to worry about getting buyers to cash you out to get any underlying loans in a seller’s name paid off. You can keep the property as long as you want and hold it for income. I only buy by taking over the existing loans by either doing a L/O or buying subject to where my goal is to get the deal cashed out within a few years. So I want more commitment from my potential buyers! If they don’t want to lose all their option money then they will need to buy the property.
I also don’t go with the current market value because they are buying on terms without an obligation to buy the property. The property in all likely hood would be worth more in a year and I think getting a premium price for offering terms and taking on the risk with someone that can’t qualify for a loan is well worth getting paid more for it.
If the value goes down they can walk away and cut their loses. I’m stuck with the property! If it sky rockets in value they get the option to take advantage of that by exercising the option and I lose the additional equity. So getting a 10% premium in my mind is well justified.
In the end if I had to make concessions somehow to get them financed then I also have the extra room to play with. I might need to carry a small second or help to pay some of their closing costs or whatever. That 10% premium can help a lot in those cases where I still at least get full value that the property was worth when they first entered into the L/O agreement.
Everyone has their own thing that works for them and if that’s what works for them then more power to them. That’s how I look at it. There is no one way of doing things in this business. EVERYTHING is negotiable and as long as both sides are in agreement, then I say go for it!
Re: On the subject of L/O - Posted by rodd
Posted by rodd on April 15, 2002 at 13:39:41:
what is an arm?
see anything wrong with this? - Posted by star
Posted by star on April 16, 2002 at 09:05:08:
We set our lease option up a little different I think(we are sellers). Do you see this working for future deals. Pitfalls?
Asking price $160,000
Option consideration: $4500
2 year l/o agreement.
We have two contracts. The first is a lease/rental contract. The $4500 is the deposit and is non-refundable (really the option consideration). The purchase agreement price is written as $155,500 ($160,000 minus the $4500)that may be excersised from now until the two years are up. Does anyone do this??? It avoids the $/month out of the purchase price. I wouldn’t mind that, it just seems clearer.
Star
Re: On the subject of L/O - Posted by JohnBoy
Posted by JohnBoy on April 15, 2002 at 13:44:18:
It’s the two limbs attached to the shoulder area of your body. Usually one on the left side and one on the right. You know, those things hanging down on your sides that you hands are attached to! LOL
It’s an adujustable rate mortgage.
Re: see anything wrong with this? - Posted by JohnBoy
Posted by JohnBoy on April 16, 2002 at 10:40:13:
If you are listing the $4500 in the lease agreement as a deposit then that can be a problem. You could be forced to refund the deposit regardless of whether you say it is non-refundable or not. I think you could have a hard time convincing a Judge that you should be able to keep a tenant’s deposit for no reason.
List the $4500 in the OPTION agreement stating it is non-refundable option consideration. List the option price for the full $160k. State the non-refundable option consideration shall be applied towards the purchase price IF and ONLY IF, the optionee exercises the option. Then at the time of exercising the option is when the $4500 would be applied and deducted from the $160k purchase price leaving a balance due of $155,500.
The lease agreement should NOT state anything at all pertaining to having an option on the property nor should it have anything to do with stating anything about the option money paid or being entitled to any rent credits if you give any. That should all be in the OPTION agreement only!
Get $100 for a deposit on the lease agreement. That way you can show something that was paid as a deposit and not have any confusion with the option money being claimed it is a security deposit.
Re: On the subject of L/O - Posted by Rodd
Posted by Rodd on April 15, 2002 at 20:43:07:
is this something that a poor credit person can get? by the way, very funny lol