Posted by Brad Crouch on April 10, 1999 at 12:23:58:
David,
If you were to lease option a 10 unit apartment building, for example, the buyer would be the one collecting the rents and simply make payments to you on the whole shebang. No doubt a little less than he collected.
On a duplex, you might lease option to one of the present tenants. They would be expecting to exercise their option to buy the entire property and in the meantime would be collecting the rent from the other tennant
I was wondering how you could work lease options into multiple unit property purchases. I may have blinders on,but it seems as if l.o’s are only for single family homes. In order to lease an apartment building with an option to buy would you have to first convert the apartments into condo’s?
It is many times called a master lease when used on multiple unit properties. It can be a strong technique particularly in properties with vacancy problems. What you basically say is I will master lease the entire building for $1000/mo. If the rental income = $1200 per month, you get to keep the $200. The benefits to the seller are one check each month, not having to hound tenants to pay the rent each month and much easier management. Usually when I propose this I will agree to pick up any repairs up to $100. This is a very attractive proposal for a disgruntalled landlord. He still keeps the tax benefits etc. and it ends up being comparable to a management company. As a buyer, you get the benefits of any rent increases over the lease term and the amount accumulating towards the purchase price. It can’t work in every situation, but in the right situation, lease options can work out.