When you have a tenant-buyer in a l/o deal is there a standard percentage of how much of their monthly rent is applied towards purchase? Is any of the spread (above mortgage payment) applied or just the amount of the mortgage payment from the current owner?
Joel,
I too have several L/O’s in my portfolio.
I have used courses from Legrand, Kaiser and Bronchick to some extent, and then tailored each deal to my own.
I have only had to pay rent credits a couple of times.
I simply do not offer them.
When a possible T/B’er mentions them or asks for them, I will generally only offer them $100/month.
I can do this easily enough, because there price will be high enough to compensate.
$1200 more off the price when we close later is really nothing, but it seems to make the T/B’er feel like they are getting a better deal, and not throwing away the rent.
Like Bob below, when the topic comes up, I just tell the T/B’er that there rent is only covering my payments on the home, and therefore there is no room for rent credits.
It seems to satisfy most.
HTH,
Jim IL
P.S. I do generally try to negotiate some rent credits for myself when I buy though.
But will not kill a deal if the seller will not do it.
We make our money based on the sale price (under market value, or right at) and the rent per month we pay.
Re: Lease Options w/Ron Legrand - Posted by Bob Taylor
Posted by Bob Taylor on January 16, 2001 at 09:00:04:
Joel:
I have taken Legrand’s courses, and, have several L/O’s in my portfolio. Who says you have to give rent credit? Only you do.
When rent credit is mentioned I always say"I am just covering my payment". But, I will do this-If you would pay $100.00 above the lease payment, I will give you $200.00 credit toward the price of the house. Some people say they will do and some say O K thanks, that is good to know. Nobody has done it yet.
Posted by Rick(CA) on January 17, 2001 at 01:15:40:
Jim,
I remember reading somewhere that giving someone rent credits towards the purchase of the house can be construed as an equitable interest in the house. In fact, there was a court case in which the judge ruled in favor of the tenants because of this. So, I’ve always believed that rent credits are a risky proposition.
Rick,
Honestly I have never even thought about that as an issue.
However, since when I sell via a L/O, I use two seperate agreements for the buyer, a lease and an option agreement, I’d only mention the rent credits if there were any in the option.
This way, when/if the T/B’er defaults, the option is null and void, because the corresponding lease was violated.
Isn’t the “equitable interest” argument why we use seperate agreements anyway.
But, again, I generally do not pay rent credits, so the issue is not one I plan to deal with much if at all anyway.
Let us know if you find anything else about this. It would make interesting reading.
Take care,
Jim IL
P.S. Was that the Alpine machine you referred to in another post?