Posted by Shawn J. Dostie on July 14, 2003 at 20:07:32:
It depends on your buyer, your feelings on that day and the downpayment. Safety for you the seller would lean more to the Lease option. I would hold their option deposit, making sure it was no more than a 3 year tenancy, and that the optionee knew that if they couldn’t cash you out in the three years, you could continue to rent it to them, or even carry the entire note yourself, but under no circumstances would they get their option deposit back. And that would be in writing. The rental payment would be enough to cover both your underlying payments plus enough to cover taxes, insurance, plus a little for your risk. If they have some real money down you might consider the land contract(Contract for deed). Thae payments should be higher than what you are currently paying, and I prefer a pretty stiff rate of interest because my principal gets paid quicker than theirs creating a larger spread at payout time, and because it encourages them to get refinanced sooner, therefore limiting my risk. Here you have a saleable instrument. A L/C can be sold at discount for cash, whereas a L/O can’t. However it’s easier to evict than to foreclose, although there are legal, ethical, and moral ways to get some of them to move without the foreclosure headaches. It all boils down to what you are most comfortable with. I’ve done both. I’ve never had a L/O tenant fulfill, but then again I can do it all over again with higher numbers as time goes on.