OfflineTo all of you lease options kings and queens, I need some help and some advice on these. When you go to sign a lease option agreement with a seller, what are the main objections you may overcome and what is your response to those questions? I had one last night, and the dad asked about 10 thousand questions that some of them I had never really gave thought to. He was very well prepared, and since it was my first possible lease option deal, I was going in there with knowledge, but no experience on how to actually put together a deal. Knowledge is excellent, but having knowledge and experience is a whole different ball game. Here's the deal: I was going to take over this lady's payments with no money down on the property. I was then going to lease it back out to a retail buyer for about 15K more than what I purhcased the house for and then up the monthly payment by 200.00 to create a positive cash flow situation for me. I have a waiting list of retail buyers that have been checked out that have filled out our application and have gone through the screening process. This house was in decent condition, and had 5 bedrooms 3 bathrooms. The price tag on the house that I was going to pay for was 73,203.85 which was what was the remainder on the house mortgage. However, her father had asked many questions I had not thought of, and since I haven't been in business for long, he talked his daugter out of doing the deal. So now she is stuck with a house that she doesnt want and doesn't need. I am a very very new newbie, and I have never done a lease option. I am just putting together my first wholesale assignment. If anyone can tell me how to put together a lease option deal with overcoming objections, putting together escrow..etc. etc. I would be ever so grateful. Thanks for helping out a newbie!!! Destrie
Destrie
Failure Is Not An Option
Your saying that once you sign an agreement with the seller you can try to refi or get a new lender, I thought the property is still under the seller's name & not yours?
Everyone Can Make A Difference!
John A.
There's no new Lender coming into the picture that is where I thought you had misunderstanding. If the owner doesn't own the house free and clear there's still a mortgage on the house. Don't make yourself many more confuse, my question was directed at KimmyJ to answer regarding the Due on Sale clause.
Everyone Can Make A Difference!
John A.
"I will NOT BE BROKE! ANYMORE!"
In the name of Allah, the Beneficent,
the Merciful.
22.He is Allah besides Whom there is no God: The Knower of the unseen and the seen; He is the Beneficent, the Merciful.
23. He is Allah besides Whom there is no God: the King, the Holy, the Author of Peace,the Granter of Security, Guardian over all, the Mighty, the Supreme, the Possessor of greatness. Glory be to Allah from that which they set up (with Him)!
24. He is Allah: the Creator, the Maker, the Fashioner: His are the most beautiful names. Whatever is in the heavens and the earth declares His glory: and He is the Mighty, the Wise.
Your saying you can refi with the sellers lender or get a new lender, but the house is still under the sellers name s doesn't the seller have to do that?
Everyone Can Make A Difference!
John A.
Do you state in the L.O. contract when the Seller has to vacate the property, if they haven't already done so? How long do you give them to move out?
"I will NOT BE BROKE! ANYMORE!"
In the name of Allah, the Beneficent,
the Merciful.
22.He is Allah besides Whom there is no God: The Knower of the unseen and the seen; He is the Beneficent, the Merciful.
23. He is Allah besides Whom there is no God: the King, the Holy, the Author of Peace,the Granter of Security, Guardian over all, the Mighty, the Supreme, the Possessor of greatness. Glory be to Allah from that which they set up (with Him)!
24. He is Allah: the Creator, the Maker, the Fashioner: His are the most beautiful names. Whatever is in the heavens and the earth declares His glory: and He is the Mighty, the Wise.
Just remember: YOU DO NOT HAVE TO OWN THE PROPERTY TO MAKE MONEY FROM IT, YOU ONLY NEED TO CONTROL IT
Destrie
Failure Is Not An Option
So the warranty deed that the seller gives to you gives you control over the property correct? Just not the title to the property unless you pay the existing lender offer, right?
"I will NOT BE BROKE! ANYMORE!"
In the name of Allah, the Beneficent,
the Merciful.
22.He is Allah besides Whom there is no God: The Knower of the unseen and the seen; He is the Beneficent, the Merciful.
23. He is Allah besides Whom there is no God: the King, the Holy, the Author of Peace,the Granter of Security, Guardian over all, the Mighty, the Supreme, the Possessor of greatness. Glory be to Allah from that which they set up (with Him)!
24. He is Allah: the Creator, the Maker, the Fashioner: His are the most beautiful names. Whatever is in the heavens and the earth declares His glory: and He is the Mighty, the Wise.
The L/O agreement will give you control over the property. When it's time to exercise your option and your buyers option, the owner will sign over the deed at closing everyone gets their checks...and the new owner will get the keys.
Destrie
Failure Is Not An Option
everything is coming into focus. Which kind of properties are more popular with your buyers, single family residences or condos/townhomes?
"I will NOT BE BROKE! ANYMORE!"
In the name of Allah, the Beneficent,
the Merciful.
22.He is Allah besides Whom there is no God: The Knower of the unseen and the seen; He is the Beneficent, the Merciful.
23. He is Allah besides Whom there is no God: the King, the Holy, the Author of Peace,the Granter of Security, Guardian over all, the Mighty, the Supreme, the Possessor of greatness. Glory be to Allah from that which they set up (with Him)!
24. He is Allah: the Creator, the Maker, the Fashioner: His are the most beautiful names. Whatever is in the heavens and the earth declares His glory: and He is the Mighty, the Wise.
It all depends on the buyer and who I am marketing to. For the lease options, I market it to younger couples who may or may not have children who don't have the best credit to get traditional financing or the down payment to get conventional financing at the present moment. If I am doing a wholesale deal, then I market it to investors, and now that it's becoming winter, to general contractors who need work for their workers during the winter months so they don't have to lay off and pay a premium on their insurance.
Destrie
Failure Is Not An Option
the two strategies. L/O you do not get the deed, you only have the option for purchasing at a specified price. If you're going to do a L/O you want at least 25% equity in your deal otherwise you are not going to make any money or very little money on the deal. In addition, you're short changing yourself because you can't charge interest. With a subject to, you get the deed, but the seller is maintaining the mortgage in their name until you cash them out. The benefit is that you own the property while the mortagage is still in the seller's name. You have very little liability. In addition, you can offer your end buyer terms with interest. You can collect a larger front end fee. At least 5 to 10% of the sell price whereas in a L/O you can only collect 3 to 5% option fee. In a subject to, you get all the tax benefits. You can avoid having the lender call the due on sale clause by using a land trust. As far as refinancing, the idea of investing with none of your money means not investing with your money. You really shouldn't go to a bank because then you're liable for the loan. You should be using private money. 2 rules, never use a bank and never write a check out of your own pocket. Use other people's money.
KimmyJ
Press on...
KimmyJ,
I know you are big on Land Trust and i love the idea too,But when a lender calls a loan due(Lets say for the owner making a secondary contract and not telling the lender)how would a Land Trust over-ride a lien/mortgage? I remember with a Land Trust,They are good for hiding who you are or finding out who you are, Great for flipping contracts!
On this deal in question:I do not think the lender would pull the loan in the time being,The numbers are to tight.
Great Post Destrie, Your words about your plan are solid!Remember if doesn't feel right,Then there is a good chance...It is not right! Too much property out there to focus on one.
Invest in yourself!
Back to the books I go. I thought I had all my info in check. So, let me get this straight since I'm off in the ditch. Okay, when doing a subject to I take over the homeowner's pmts. on the note, get tax credit, and can then charge interest and charge a larger upfront fee. So with the subject to route, I get the property subject to existing financing...correct?? From what I was told (not on this site by any means) is that Lease Options are less riskier due to me not owning the property just by controlling the property. So, am I correct with setting up escrow for the payments to the mortgage company????
Kimmy if you could help me with this then: Next week, I have to go look at a house. The owners bought a different home and they don't want to have to pay on two mortgages. He is wanting the amount on the loan which is 34,000. The original loan amount was for 56,000.00 The appraised value on the home last year was around 60,000.00
Now, from what I understand, I can assign this deal or the owner is open to me taking over the pmts. on the house. Now, what would be the best strategy for this situation? The assignment would be easier, I would be in and then be back out, but I don't see me getting a substantial assignment fee on this. If I was to do a subject to deal on this, should I market this as a Lease Option, or owner finance??? Since I'm basically the middle man of the two, what strategy would be the best????
Destrie
Destrie
Failure Is Not An Option
The Land Trust helps not to give out a red flag to the bank. The St. Germaine Act allows homeowners to put their home in a trust and not get penalized by the bank with the due on sale clause. Basically, let's say the bank for some crazy reason decides to check title on their mortgages. They come to your deal. You used a land trust and called it Seller A Trust. The bank has on file for the title Seller A, but not the trust. The person looking at the title will think, oh they decided to put the house in a trust and move on to the next mortgagee. However, let's say you had Rosefield Trust. That would send up a red flag and they may start to investigate. The land trust does not guarantee that the bank won't call a due on sale clause, but it will help disguise the real person holding the equity. If you're making payments on time, the chances of the bank finding out our slim and none.
KimmyJ
Press on...
Your goal as an investor is always to go for the deed! If the seller just wants out and is willing to sell the house to you for what they owe, then you should always go for the deed. You just bought a house for free or maybe a small deposit. Why would you want to lease when you can own a house?
The house with the 34k loan, does it need repairs? Right now if you don't need repairs you're at approx. 56% of FMV. That is a great number for subject to strategy! You don't want to go over 75% of the FMV. At 56% you can build in a nice profit! What are the payments and do they include taxes and insurance?
KimmyJ
Press on...
I think that in today's market the banks are happy to just get paid that they may not go that route....don't they want to avoid any foreclosure action? So, therefore, I would have a attorney put this into a trust or how would I go about doing that??? My head is spinning.....lol
Destrie
Destrie
Failure Is Not An Option
How can anybody fail,When so much Given!Other than that....Take the high road LOL!
Invest in yourself!