Re: L/O - Loan Balance vs. Rent Credits - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 21, 2000 at 09:42:42:
Like you, most of my sandwich L/Os set my purchase price at the seller’s loan balance at the time of closing, and my monthly rent payments are the same as the seller’s mortgage payments (insurance and taxes may or may not be included, depending on the deal). I generally don’t include rent credits on my payments. However, these are typically deals in which the seller has little or no equity and isn’t looking for any cash out at the end.
I could see including a provision for rent credit if the seller had some equity they were unwilling to give up or if the only way they would do the deal is with a higher purchase price OR monthly payment than I really wanted to offer. If the deal made sense otherwise, then I might be willing to bump up either the purchase price or monthly payment, while including a rent credit provision to effectively get some of it back at closing.
However, I ALWAYS include rent credit for my T/Bers, usually $100 per month. Don’t know whether the evidence really supports it, but my gut feeling is that the rent credit encourages both timely payment and exercise of the option, since the T/Ber perceives they are getting a “discount” from the agreed-upon purchase price.
PS: How did you make out with that pre-foreclosure? Or was that Kelly’s deal?