sell before you buy - Posted by Brian

Posted by Lyal on September 13, 2004 at 08:01:52:

Brian,
You haven’t heard these terms from your friends because they are commercial real estate concepts. They don’t translate will into the SFR market (too confusing for the average buyer, seller, agent).
All the best, Lyal

sell before you buy - Posted by Brian

Posted by Brian on September 12, 2004 at 20:20:19:

I want to apologize in advance for the long post.

I am wanting to look into using a purchase option to “sell before I buy”. I still want to buy cash and sell on a note. I like the reassurance of knowing that I have a buyer already lined up before I put up the cash. I realize that my margins may be smaller doing this and that some sellers may make deals behind my back. I am OK with these risks. I want to do this minimize my risk of over paying while I’m “learning my market”.

I’ve been searching the archives, however most of the results are related to lease with option to purchase. Could somebody point me to some good posts regarding using a straight option on the buy side. I know Ernest’s GRHO course covers “Lease w/ Option to Buy” and “Net Lease” (not sure I understand what that is yet), does the GRHO course cover using an option to “sell before you buy”. I don’t mind buying another course if it will teach me what I want to learn. I remember seeing one or two paragraphs about this in one of Lonnie’s books. If there’s more information on this in one of Lonnie’s book please point me to it.

Sorry again for the long post.

Thanks,
Brian

Re: sell before you buy - Posted by The55+GuyFromAZ

Posted by The55+GuyFromAZ on September 12, 2004 at 23:27:33:

The problem with lease-options is that you must make monthly payments to the owner/sellerand if you default at any time during the term of the lease-option, you lose everything you have invested. But with a straight option, you pay a one-time option price (whatever amount you and the seller agree to) and that amount is the only money you lose if you don’t exercise the option (complete the purchase at the pre-agreed purchase price before the option expires).

**This link will give you more detail on it - http://www.businesslyceum.com/REOptions.html

A net-lease comes in 3 varieties… net, net-net and net-net-net (commonally referred to as net, double-net, triple-net or N, NN and NNN). With a triple-net, the leasee (renter) pays rent and ALL expenses associated with the property… i.e - if the roof leaks or someone’s dog eats the carpet, they pay to fix it. Net and double-net are just modified vesions of this, in which the landlord pays some portion of the property upkeep.

When Ernest refers to a “net lease” he’s speaking of a mobile home park BUYER, leasing the park from the mobile home park SELLER… it’s just a way to kick the tires and see if you really want to own it, in which case you’d convert the net lease to a lease option or just buy it straight out via seller-financing or a bank loan.

Re: sell before you buy - Posted by JP(SC)

Posted by JP(SC) on September 14, 2004 at 07:20:44:

Are any of these concepts similar to a long term lease?

The reason I ask is…
I was talking to a lady who owns several parks. One park has about 40 spaces with about 4 filled. She is getting old and wants to enjoy her golden years without the hassles of the park but does not want to sell the whole thing outright. The county will not let her sell individual lots (she would do this if she could). Without knowing much about it, I casually asked if she would consider a long-term lease of spaces or blocks of spaces; somthing like 20-30 years. Essentially selling the spaces without the sale. This sounds like a commercial real estate concept. Could you refer me to a book or course that teaches this conept? Or could you tell me why this is a terrible idea?

Thanks.

Re: sell before you buy - Posted by Brian

Posted by Brian on September 13, 2004 at 04:32:24:

Thanks, I already have the material from the link you provided. I purchased it about a year ago when I was looking into optioning sfr’s. I’ll go back through it and apply it to MH’s.

The N, NN, and NNN information was interesting. I’m surprised I haven’t heard the terms before. I’ve spoken with several people who l/o sfr’s and they’ve never used the terms.

Thanks again.

Re: sell before you buy - Posted by The55+GuyFromAZ

Posted by The55+GuyFromAZ on September 14, 2004 at 10:55:46:

A lease is a lease is a lease… it can be to whatever terms and length that you and the landlord agree to.

She could “rent” you the lots, which you in turn could place mh’s on, that you will rent or sell to the occupant.

The only “terrible” thing about it is that your responsible for the lot rent, no matter what state of occupancy the home is in… it won’t matter if it’s full, empty, being rehabbed, whatever… the burden of the lot rent is on you.

Given the park’s current occupancy level (far more empty than full), and her unwillingness to sell straight out… I would offer to ‘net-lease’ the park on a long-term basis, with the option to buy it at a later date at a pre-determined price.

Contact Ernest Tew for the “book” and guidance if this is what you want to do, he’s all over it.

Re: sell before you buy - Posted by The55+GuyFromAZ

Posted by The55+GuyFromAZ on September 13, 2004 at 12:21:07:

I wasn’t suggesting that you buy that material, it just happened to be one of many links produced from a google search that explained the straight option concept with out alot of other “clutter”.

Your accustomed to dealing in residential real estate and it’s associated terminoligy… N, NN, NNN are commercial real estate terms and therefore not applicable to what you and your peers do.