Concerning the duration of the lease/option, it is best to reach an agreement with the seller during your initial negotiations. The duration of virtually ANY contract can always be extended later by mutual agreement of the parties involved, but it is generally easier and less risky to come to terms up front. By setting up a lease/option for a specific minimum period (i.e. one or two years) with renewable additional time periods (i.e. one year increments), you are only obligated for one year at a time. You can CHOOSE to exercise your option at any time during the term of the contract, but you are not OBLIGATED to do so.
?Does the seller have the right to say no to this??
Initially ? yes, later ? no. You and the seller would have to agree to the terms of the lease/option up front. And, yes, the seller can say no to any portion during negotiations. But once the parties execute the contract (sign on the dotted line), the parties must abide by the agreed upon terms.
?Is there a new contract that has to be negotiated yearly??
No, the original contract remains in force and its duration is simply extended by virtue of the terms originally negotiated between seller and buyer. Each year that the buyer chooses to extend the lease/option, he would simply notify the seller in writing to that effect.
BTW, I proposed a one-year initial term with the right to renew for eleven additional one-year terms because you indicated in your original post that the ?owner is considering seller financing for no more than twelve years??
Goals: -To purchase this property with no money down
-Earn at least $150/mos. in rent (positive cash flow)
-Do 14 more deals like this and retire!
Opportunity: Found a seller who would consider a no money down deal.
Here are the details:
built in '84
2/1 home
garage converted into an extra room (nicely done, I usually frown on these) making it a 3/1
nice landscaped yard
ceiling fans
nicely carpeted rooms
kitchen looks updated
includes electric stove
includes a dishwasher
automatic attic exhaust fan
fire place
been on market for about ten months
asking $47,000
owner is considering seller financing for no more than twelve years at 500 to 600 per month
rents for 500 to 650 a month
taxes are 1036/yr
insurance is 281/yr
Owner/seller is asking me to put a deal together. How do I put a win win deal on this with no money down?
By the way Jim, is there a way, here in Texas, to do a title search on our own, or do we have to fork out $$$ to get them done every time we run into a good deal?
I just make clear and marketable title a condition of my purchase. I don?t waste my time or money doing a title search until I have an offer accepted. Then I let the title company do the work.
This is the way I do it. Others that visit here may have a different approach.
I don?t see much of a deal here. The seller is asking more than FMV and ?is considering seller financing? that would eat up all the potential rent, leaving no room for vacancy, maintenance or management, much less positive cash flow.
Personally, I wouldn?t waste a lot of time with this seller but since the property has been on the market for ten months and you say that the seller would consider a no money down deal, I might try to find out a little more about the seller?s circumstances. You mentioned that the seller and sons are rehabbers. I do rehabs and if I had one sitting on the market for ten months, I?d be bending over backwards to move the property.
If the seller is hung up on getting his price, you should be looking to get VERY attractive terms. If you decide to pursue this deal, you might want to make an offer that gives you control of the property at terms that allow you to make a profit while minimizing your liability. A sandwich lease/option comes to mind. A cursory overview might look something like this:
TO the Seller:
Option Consideration: $10.00
Monthly Rent: $500
Option Price: $40K
Duration: 1 year with right to renew for 11 additional 1-year terms
FROM your Tenant/Optionee:
Non-refundable Option Consideration: $3K
Monthly Rent: $650
Option Price: $47K
Duration: 1 year with right to renew for 2 additional 1-year terms
Of course there are lots of other details (i.e. your first payment starts when you find your tenant/optionee) but you get the general idea. You can even ask for rent credit.
Some of the other pros that visit here may have other suggestions on how to structure a deal with this seller.
How does that work in the above deal with the right to renew for eleven more years? Does the seller have the right to say no to this? Is there a new contract that has to be negotiated yearly?