Posted by JohnBoy on May 22, 1999 at 17:14:55:
First you enter into a l/o agreement between you and the seller. You have the seller sign a performance mortgage to secure your interests in the property which you will need to record at the county court house. If the seller has a mortgage on the property then you should set it up to where you will make the sellers mortgage payment directly to the bank and send him the difference each month if there is any. Or set up a 3rd party escrow account where you send your rent payment to and they in turn send the mortgage payment to the bank and any difference to the seller. This prevents the seller from pocketing the entire rent payment and skipping the mortgage payment preventing the property from going into foreclosure.
Next you secure a tenant/buyer that you will be sandwiching a l/o to. When your tenant/buyer is ready to exercise the option you in turn exercise your option with the seller. You set up a simultaneous closing to take place with the title company. The proceeds from your tenant/buyers loan will pay off your seller and you will pocket the difference.
You should invest in getting Bill Bronchick’s L/O Course. His course covers everything you need to do and comes with all the proper forms and contracts you will need to properly structure these types of transactions. A little money spent today on educating yourself can save you a lot of money later by paying for mistakes that could have been prevented in the beginning.