Using the lease option money for closing costs? - Posted by Matt Selph

Posted by Gerald-DC on July 29, 2002 at 22:52:05:

I cannot recommend that you take over the deed without you providing additional information. What is your exit plan? As a practical matter, getting the deed requires some knowledge and study which you apparently don’t have.

Let’s cut to the chase. You don’t want to make their problem your problem. If you get the deed, what are you going to do with the property? Can you drive back and forth 2 hours each way until you find a tenant? Do you have the cash to make payments?

I asked you a bunch of questions in my previous post which you didn’t answer. Believe me, better to honestly answer these questions now than to get in over your head.

Not trying to bust your chops, but getting the deed has certain risks that you should seriously consider. Many of the seasoned investors here on CREONLINE strongly caution against newbies taking property subject to the existing mortgage. I concur.

If you want to get the deed or do a lease option, you simply must do a lot of due dilligence and research. You clearly need a course and the requisite forms. As a another poster noted, Bronchick’s Alternative RE Financing is an excellent course. The ABC’s of Subject To is another good by Randi and Charlie France.

I think you should study the ins and outs of subject to deals and lease options for months before you touch one. When I first started, I was so egar to do a lease option that I omitted several important factors when I inked my first l/o contract. Big mistake. My lease option deal quickly turned into a four month rehab project and for all the time and aggrevation I made about 7K. I’m blessed that I made anything at all but still the point is don’t take this on if you are not ready and based upon your comments, I do not think you are ready. (But I think you are on the right track).

I stand by my original recommendation for you which is to birddog this deal, make a quick grand and learn from the person who you birddog it to. Also get a good course, educate yourself.

If you are determined to get the deed or do a lease option and don’t want to spend money to get a course, then search the archives for “subject to” or “lease options” You may also want to find a mentor who may be willing to take you by the hand in exchange for some the profits.

Again, don’t make the seller’s problem, your problem. Even if you get the deed, if you haven’t done your due dilligence and you don’t have the financial resources to repair and hold this property, you will be going to a seminar. (Ron LeGrand also has decent materials on the subject) but I personally like Bronchick for subject to.

Remember "to the swiftist does not always go the race."
In your case I take this to mean that although you are hyped up and ready to charge, slow down, step back, assess your ability to do this deal and honestly answer if you can handle it.

Best regards

Using the lease option money for closing costs? - Posted by Matt Selph

Posted by Matt Selph on July 27, 2002 at 23:28:04:

I have never done Lease option before so I have some basic questions. I would really appreciate any help in this matter. Thank you,

Okay, so I have found a very motivated seller of a well kept 4 bed 1 bath house. He wants me to take it off his hands ASAP (it has been vacant for a year). He said it appraised a few years ago for $114,000 and he will sell it to me for $90K. The house is about a 2 hours away so I thought it would be good to lease option. Does that sound right?

The mortage will be about 650 a month and I think I can get $750 from it maybe 800. Can I usually get more monthly if it is a lease/option?

Does that $100 go to me or is that the rent credit? Do I keep that in an account to give back at the time of purchase or can I just tell the lender that they paid it to me?

The trickiest part of all is the financing. I am able to get 100% financing but do not have the $ for closing. Am I able to have the option consideration money go towards the closing? Then, should I have the loan on a 5 or something year ARM to make the passive income higher?

I could use any help possible. Thanks a ton!
Matt

Get a course or assign contract! - Posted by Trevor

Posted by Trevor on July 29, 2002 at 15:24:06:

I still a newbie, but it sounds like you seriously need a lease option course. I’m studing Bronchicks and it’s great so far. Another thing you could do which is not hard, is to get it under contract NOW, with contingencies, get on the phone and call some investers and assign the contract to them for a profit. If you can’t find anybody to assign to, then with your contingencies you could back out. Any pros, if I’m off base please let me know.
Good luck.
Plan ahead and get a course.

lease option money for closing costs? - Posted by Gerald-DC

Posted by Gerald-DC on July 28, 2002 at 21:26:54:

How motivated is your seller? Another word for motivation is desperate. If you can lease option the property from him and then lease option the property to a tenant buyer, then your out of pocket expense may not be that much.

However, is this property in move in condition? Is in good enough shape that a tenant buyer will be willing to pay 4 or 5 grand as an option deposit? Is it in an area where people who have that type of cash for an option will want to live?

There are a lot of issues here and to answer your question, NO you cannot use the option deposit from your tenant buyer as a down payment unless you obtain possession of the property prior to your close with the seller, find a tenant who has the cash to put down, collect the money and then close after all of that. As Joe Kaiser said in so many words, don’t do deals where all the planets must be in alignment and Jupiter is in the 12th Moon and Acquarius is in harmony with Mars. The point is, for your scenario to work, so many other things have to happen and happen without delay or hitches. In real estate, that is the exception rather than the rule.

Being two hours away doesn’t help either. There could be a deal here, BUT I’m not sure if this is a good deal for you since you are so far away and since you don’t have any money.

The first thing I would do if I were you is find out if the seller will just give you the deed and let you take over the payments, if not, see if he would do a lease option.

Even if he does agree to give you the deed or agree to lease option the property to you, you still have to factor in any repairs that have to be done and carrying costs until you find a tenant buyer. Also, you need to know with more certainty how much you can rent the house for.

Sounds like this may be a good deal to birddog to an investor closer to the property. If it is a good deal, you may be able to collect between $500 to $1000.00 and maybe be able to learn from the person you birddog it to how to structure these types of deals in the future.

Best regards, try to make something happen here.

lease option money for closing costs? - Posted by LGR

Posted by LGR on July 28, 2002 at 19:38:35:

Matt, I don’t know about lease options. So I won’t touch them as far as the financing. There are ways to structure those so that you come out of pocket with NOTHING! Creative fiancing can put you in the drivers seat. e-mail me with your number and we can talk…

Re: Using the lease option money for …? - Posted by Julius Levai

Posted by Julius Levai on July 28, 2002 at 24:34:02:

Matt ! I will advise you to get Bronchicks and Kaisers L/O packages like yesterday, and study them like crazy. There is no shortcuts to success…Julius

Re: L/O questions - Posted by John

Posted by John on July 27, 2002 at 23:54:51:

Hi Matt

I also have a few questions about lease options, please see my posts below.

John

Re: lease option money for closing costs? - Posted by Matt

Posted by Matt on July 29, 2002 at 14:21:45:

What is the procedure for taking over the deed? This may be my best bet because they seem to be desperate. They just want to get out of the payments.

Re: L/O questions - Posted by freddie

Posted by freddie on September 05, 2003 at 06:53:08:

Guys I would love to know what transpired over the last year concerning this deal please respond .I?m hoping things went well .