Dilemma with lease/option closing. Advice Please! - Posted by Craig
Posted by Craig on August 18, 2003 at 13:16:12:
Here’s the long and short of it:
Doing a sandwich lease/option with a 3/2/2 townhome that has very little margin. Have been renting the home to tenant/buyers for about 10 months, but renters notified me a while back they will be moving out in Oct (end of lease term) due to a job transfer out of state. I found a couple who want to purchase the home outright and we have a closing date set for Sept 27 - one month before my current renter’s lease is up.
The problem is this - the buyers are so sketchy about purchasing their first home, and they are hanging on by a thread as it stands. Thinking my current tenant would be ok with moving out a month before his contract ends, I offered him $1000 of his non-refundable option fee. Not so. He said he would need close to $3000 (all of his up-front option fee) to go through the trouble of putting stuff in storage and finding another place to rent for 1 month until he moves.
My dilemma is it took soooo long to find a good tenant/buyer in the first place, and only by the grace of God did I find buyers to purchase this place in Sept, so I really want to get this property off my hands. If I delay the closing until the end of Oct, the new buyers will have to get a new rate lock (rates just shot up recently) so that would not fly. I’m thinking of offering the tenant $2000 to move at the end of Sept and he can put stuff in storage and live in an extended stay hotel or something.
FYI - I’m looking at margin of about $4500 if I give the tenant $2000. The major risk I’m considering is if I give the tenant $2k to move out Sept 30th and the new buyers are unable to close on the house, then I would be out $2k + $1250/mo mortgage pmt until I find another tenant! Not a good situation. Is there any way I can mitigate this risk?
Any suggestions you have would be greatly appreciated!