Posted by Sean on June 16, 2006 at 11:28:16:
I’d be hesitant to lock up any property where the owner is willing to walk, and you are going to be relying on him to make a differencial payment to the bank above and beyond what you are paying him monthly…
If he’s ready to walk, that differential payment, if not the entire payment is going to be the first bill he doesn’t pay if his financial situation changes or he just decides hell with it.
Is there an opportunity there? Sure… but if he stops making that payment and your tenants get the eviction/foreclosure papers because the banks taking the house… what’s that make you look like? Yea, you aren’t legally on the hook, but those tenants just forced to move because of this are going to bad mouth ya for decades…
I lease option, we send the full payment to the bank and send copies (if they want them) to the owner.
I know this technique can be done, but its probably not one I’m going to do… see if he can refi to a lower payment… if so, and its less than rents… go ahead with the L/O.
Just my take.