Posted by Jeff on March 07, 2001 at 15:31:23:
Yes, you have some good points. My yield will go down if the first purchaser on a L/O agreement falls through. But, I will keep their 5% deposit, which will help the yield.
If I didn’t prequality people for a living, I would be more concerned.
And yes, I think your numbers are correct, that 65% of L/O’s don’t close. I think that is a positive. If I have to L/O it twice, each time with 5% deposit, I’m happy.
The lease I will use, requires the occupants to pay for any repairs not covered by the home owners systems warranty.
The occupants have a built in incentive to keep the place in good shape, and I can further motivate them to do so, if they decide not to excersize their option to purchase by offering a small amount of their deposit back to them if they leave the house in perfect shape.
Your ideas about a L/O from the current buyer are good ones. In this case, she is moving out of state and wants the cash in her account for peace of mind as she does not work.
The property is in an excellent location and will sell quickly under a L/O scenario, and will have some appreciation, which, if the first L/O falls through, will also help the yield.
It’s a judgement call on my part not to press her on the terms of the deal. But, I will re think it tonight. It’s not in writing yet, so nothing is binding, and no $ has changed hands.
Like I said, it’s not perfect, but the yield is excellent.
Thanks for the input