Posted by Michael_NJ on July 04, 2002 at 19:34:28:
here is a friendly comment though, you should of know the answer to your question in whether or not you needed a lawyer!! If someone were reluctant at something and even asked if they needed a lawyer in addition if it was leagal then I would have approached you the way I did but regardless I just wanted to help you out.
Thanks,
Michael Skibitzke “sky is the limit”
I NEED HELP ON LEASE OPTION - Posted by Gary
Posted by Gary on July 04, 2002 at 17:47:42:
I need help on how to structure a lease option.
People rent home from me, I would like to sell it to them. They cannot get conventional financing due to poor credit. I am asking $55000 for home at 9.5%.(not nagotiable) I do not totally understand how L/O work. Could someone please help me.
Thanks,
Gary
Re: I NEED HELP ON LEASE OPTION - Posted by Scott
Posted by Scott on July 04, 2002 at 21:25:34:
Gary
Here is how I would structure it. Make contract for 1 year at a time for one. Try and get 5k and work from there as far as option money goes. Dont go less than 2k. If for example their rent is 1000. I would give them a rent credit of 500 a month. I would also sale about 5k above apprasil. You make money 3 ways doing it this way.
first of all the reason you want as much option money is in case something bad happens in the agreement. They leave trash the home etc… This option money is non refundable. You do one year at a time. At the end of each year they must again give you option money to get a new contract if they dont buy the home at the end of the year. Charge about 50% of what they gave you the first year. Be generous with rent credits. You have to give sometimes too. Try and make everyone happy. If their happy you will be happy. Raise price 5k above appraisal because without your creative techniques they may be lifetime renters. Charge a little above normal rent about 100-150 You can do this because a % of money is going toward them paying off the home. If this couple your talking to doesn’t want to do the deal this way a gurantee you, advertise it and someone will within 30 days! You need all good contracts do not use generic contracts becasue their just that GENERIC. If your interested in some contracts or more advice contact me. Good Luck and GO make it happen!
Re: I NEED HELP ON LEASE OPTION - Posted by nat
Posted by nat on July 04, 2002 at 20:56:54:
lease option is a right to control a property for certain amount of times (1-3yrs mostly/) but not a obligation to purchase. you have a buyer that don’t qualify for conventional loan but want to own a home.they have money to pay for down payment around 5-8% asking seller price, Option Consideration (non- refundable,not deposit) amount for the property .
you give them two separate agreement one for lease and one for the option agreement. the monthly payment will be higher from their current payment which means more $$$ in pocket.why higher because you will give them credit toward the purchase price once they exercise their option, example $ 500.00 current rent+$100.00(credit for option)=600.00/mo.
you need also to put that in the form about the credit $$ which mostly T/B are happy about.
About the maintenance of the property you will also put the amount of your obligation in writting again. you will tell them since they are trying to purchase the property you expect them to treat their place as their own now, which mostly do. this is their future house and a expensive investment.
Maintenance, you will tell them (repair) anything beyond (let say)$300.00/yr, depend on your area, you will cover it as a seller.
since you are a good seller, during those option years you can help them build their credit too.
some seller do some owner financing (not sure if applicable). if your not clear about this, think like a Lay-away in department store, similar to how it work.
Just my 2 cents
Nat
Re: I NEED HELP ON LEASE OPTION - Posted by Michael A. Bardelli
Posted by Michael A. Bardelli on July 04, 2002 at 18:22:38:
Gary,
You stated in your post that you were going to offer the property for 55,000 @ 9.5%. It sounds to me like you are trying to owner finance the property. Is that the case? For a lease option, consider the following:
When the current lease is up, you can sign a new lease and a separate option agreement. Negotiate an option consideration and rent credits. Sign documents and you are on your way. If you need forms to make this work, then consider purchasing William Bronchick’s Nuts and Bolts of Real Estate as it has all of the forms. I believe he also has a lease option course that is dedicated solely to lease optioning. Hope this helps.
Sincerely,
Michael A. Bardelli
Re: I NEED HELP ON LEASE OPTION - Posted by Michael_NJ
Posted by Michael_NJ on July 04, 2002 at 17:56:00:
I just answered you on your last question, a post and a half down but here is something I do know if your now to familiar even with Lease/Option or even Real Estate Ivesting in general than I would recomend on buying some courses and getting more familiar with the way the whole things works… Just my .02 cents…
P.S. you have to know all the legal ways around this and make sure you cover your butt at all time and always have an exit strategy. I haven’t done any deals yet but I’ve been reading long enough all the down falls as to REI is concerned. But you’ve accomplished one thing you have the desire just keep it burning and always want to learn!!
P.S.S. You may not get responses some time because most of the other RE Investors always anwser the same questions all over and over again, search through the archive and search through key words that you need clarifying in…
Michael Skibtizke “Sky is the limit”
you’ve never done a deal? - Posted by Sam
Posted by Sam on July 05, 2002 at 07:57:23:
Are you saying you have never done a deal yourself and are giving advice here?
Re: I NEED HELP ON LEASE OPTION - Posted by Gary
Posted by Gary on July 04, 2002 at 19:01:12:
Mike,
I am not new at rei, I own 5 rental properties and have an offer on a 6th one. I am just new to selling. I buy and hold usually. Another mike gave me some advice.
Thanks,
Gary