Minimizing risk when buying on L/O? - Posted by Monique

Posted by Monique on May 31, 2000 at 08:10:20:

Lori,

That one-liner is PERFECT!

Thanks for the great advice,
Monique

Minimizing risk when buying on L/O? - Posted by Monique

Posted by Monique on May 30, 2000 at 21:08:18:

When buying on a Lease/Option, how do you minimize your risk of not being able to find a suitable T/B quickly, at the targeted monthly lease amount? We want to make sure that we’re not on the hook to make payments to our Seller if we aren’t sure how long it will take to find a T/B, and that the market will bear the monthly rent that we would need to have.

Do you market the property to prospective T/B’s before signing the L/O with the Seller? If so, how do you make sure that the Seller doesn’t strike a deal with the T/B directly since you don’t have a contract in place?

Or, do you make your contract to the Seller “subject to Buyer’s ability to find a suitable subtenant/buyer.” Conti and Finkel say that they use such a clause in their lease agreements. It sounds like a real squirrelly weasel clause to me. Has anyone done this successfully?

TIA,
Monique

Re: Minimizing risk when buying on L/O? - Posted by Bud Branstetter

Posted by Bud Branstetter on May 30, 2000 at 22:39:43:

What Lori says is the best way to go to minimize your risk. That is the whole idea of L/O is low into a deal. I do think that as you get to know your subdivisons that you will do you will know what payment the property will command and whether you should commit to a payment first. For the first few if they won’t do it your way then they aren’t motivated like you want.

Re: Minimize risk with a one liner… - Posted by Lori Samson

Posted by Lori Samson on May 30, 2000 at 21:46:01:

I use the simple clause "Payments to commence upon proicurring a suitable subtenant"
Now you don’t pay until you get paid! If a seller objects I might consider it bit usually I tell them it’s our company policy that we do it this way! In the 100+ deals I’ve done I have never had one go around me because I always do the contract with the seller first and I disclose exactly what I am doing and they will 99 times out of a 100 not have enough knowledge or confidence to try it without you and go around you. If I ever had one go around me I think I would walk because I wouldn’t want to do any business with them anyway and I don’t have any money in the deal yet. As a matter of fact I never have any of my money in the deals I do. My husband has done one or two that he did agree to make the payment by a certian date and he always got it lease optioned before he had to make the payment.
www.homebuyerpros.com You can go to our site and read about the benefits to buyer and sellers. I hope some of the info can help clear up some of the fog. Lori