Yes, you could lease/option from a seller with a land contract or two. But I probably wouldn?t.
First, the question arises as to how confident you are that you will get a deed if you exercise that you can pass on to your tenant buyer if he exercises. The answer is that you have no assurance that there won?t be a problem. And if there is a problem, you can?t deliver to your buyer. That?s what they call a “mess”.
Next, this deal has no equity. Taking the above risk for no equity would be foolhardy in my view.
Finally, you have a deadbeat tenant occupying the property, who someone has to evict. If that someone is you, that means you have a carrying cost and eviction costs, which will partially offset any upfront option consideration that you may receive from your tenant/buyer.
If I attempted anything in this deal…I would attempt to offer the seller a deal where I take over the contracts, subject to my approval of the contract. I would then try to discount the value of those contracts with the original seller. If I could get a serious discount the deal might interest me.
Your chances of this however don?t appear bright. It sounds like the original seller knew exactly what he was doing.
Posted by Kevin(OK) on April 22, 1999 at 23:30:35:
I am using Joe K.'s L/O strategy and I received a call today from a friend of a person I sent a post card to, here is the deal. As soon as I got off of the phone with the “friend”, I went to the CH to put together a “package” on this seller. Well, bad news. This house has two wrap around mortgages. It sounds like the seller would be happy with me taking over payments (the tenant is 3 mos. behind in rent), the FMV is $38K, the wraps are for $36K to the same, local L.L.C (they paid only $22K for this one, I wish I hadn’t seen that). My question is: can you do a L/O on a wrap(s)? I plan on selling on a L/O myself, so is this too many obstacles? Since the L.L.C. is local, isn’t there a greater chance of them finding out about the L/O? Please help!!!
…for the most part. One of the biggest problems in doing a wrap, or an L/O is knowing that the other person is going to pay. The more people you put into this picture the more people you have that might not pay.
A sensible tenant/buyer is going to look at this thing and think:
What if I pay my rent, but Kevin doesn’t pay his?
What if I pay and Kevin pays, but the wrap doesn’t pay?
What if Kevin, the wrap and I pay, but the other wrap doesn’t?
What if Kevin, both wraps and I pay, but the LLC pockets our money and defaults?
On many properties this isn’t a problem because everyone has equity that they’re not likely to walk away from. Where no equity is involved people have the ability to gain by pocketing your payment for 3-4 months and not passing their share of the payment on.