How to sign a Lease Option.

Kevin,

When doing a lease option you must have the ability to sub-lease the property to a third party in the lease agreement. Your option to purchase should be a seperate agreement. In that agreement you should make the option assignable. This will enable you to sell the option to a third party instead of having to purchase the home and then resell the home to your end buyer. I hope that this information helps!

salden
Thank you for the assistance. I am somewhat new to this. The seller knows I am an investor and will be renting it out to someone so how would I go about writing in the contract that I will have the ability to lease to a third party. I was looking over the forms on dg.com/yourtown/gregforms which includes the Contract For The Sale Of RE, Agreement To Lease W/Option To Purchase, & Purchase And Sale Agreement. I am assuming I use these forms both for my transaction with the seller and separate ones with the new tenant/buyer. Is this correct? On the Lease Option form I use with the seller would I just put my name as the buyer and then on the 2nd page #13-other terms would I add in I have the right to assign the property to another investor at anytime during the length of the contract? Or would I put my name as buyer with and/or assigns after it as well as putting I have the right to assign it to another on pg 2 #13-other terms? Also what things should I check before commiting all the way? Example should I get a title report, appraisal, and an inspection or anything else? Also he lives out of town so can or should I do the signing through e-mail or in person. I was leaning towards using an attorney to help? Sorry for all the questions this will be my first deal and I need some help but soon I hope I will be giving the advice. Again I thank you for any assistance. I appreciate this site, dean and all the family for all the great support and advice you give.
Here is my deal let me know what you guys think.
Total view value- $200,000
Zillow-$258,000
Amount owed- $170,000
His PITI payment- $1,331
Purchase price- $175,000
No option payment
5 year lease
My monthly payment- $1,350
Anything below $200 in repairs I take care of. Which the tenant/buyer will take care of. Anything above $200 in repairs he takes care of.

Tenant/buyer already lined up
Purchase price- 3yr lease at $230,000
Non-refundable option payment-$6,900
Monthly payment-$1,400 w/50 rent credit
What do you guys think?

I posted last night and just wanted everyone to see my post. I am anxiously waiting everyones knowledge and advice. Take care.

I see you are doing a sandwich lease option. Your tenant buyer has already agreed on the price? You definitely want to be upfront and honest with the home owner letting them know that you are finding a buyer, you may want to set up escrow though so that the payment gets made to the bank and the homeowner does not put you into foreclosure. I personally and this is my opinion, think the sale price is a little high for the end buyer, I'm of the belief that if you are getting a deal, give a deal. You should be using 3 forms, the Option to purchase, the purchase agreement and the lease. The lease agreement is the rental piece the actual purchasing pieces need to stay seperate.

Cathy I have explained what my intentions are when I lease from the seller. He is wanting to get out of the game. He actually has 2 other properties that he would like to sell as well so I am going to take a look at them as well and do the same thing if it makes sense. As far as the price I thought I was giving a deal to the tenant/buyer. When I asked the dg family how much appreciation I should add when doing a lease option they said to add 8% which in this deal would be $200,000fmv x 8% for 3 years=$152,000 on a 3 yr lease so I did 6% which is $130,000. Is a $22,000 below fmv a good deal for the t/b's let me know what you would do please. Take care

Today I am locking up my 1st sandwich lease! Also, today I have finally found an agent that understands what I am doing so today is a huge stepping stone in my investment career. I hope everyone has a wonderful day.

Meaning...refer to Chapter 4 in "Your Town, Your Real Estate Profits". Greg Murphy simplifies and show you exactly what forms you should use for a sandwich lease option.

Phoenx

I was running the numbers with my profitalbility wksht. Is the seller crediting your entire payment toward purchase? If so that is great for you. The sale price I came up with is 222k Not too far off your price. You aren't making much in the middle though. Is the 1400 fair market rent? Could you maybe get $1500, but credit them $100, so you are making 150 in the middle? With the numbers you have given, but with the 222k purchase price the profit on this deal is about 95K Nice work!!!

Cathy unfortunately the seller isn't crediting my payment he owes 170k so I am paying him what he owes and the small amount of principal that is paid off will be his gain. I am trying to make it a triple win where everyone is happy and I get more referrals for more deals. I am going to try for $1500 which I believe I can get but worst case I get $1400 and $50 in the middle not to exciting but the front end of 6k option payment and $54k back end are amazing! Especially for my first deal. I have been doing this for awhile now and everything I have read and studied is falling into place. These are very exciting times.

Phoenx I am just nervous and want to make sure everything is done right. I know it isn't to complicated and I know I need to relax. When I get home tonight with the keys I will be totally relaxed lol well probably not I will full of energy and excitement.

One Quick question do I need to have Contract for the Sale of RE and the Purchase and Sale Agreement signed to night as well? I believe I do but I am just double checking.
Take Care and may you create your own luck.

You can download all Greg Murphy's forms at deangraziosi.com/yourtown/gregforms Ckeck it out. Keith Success be with you!