lease option question

Our lease agreeement and option agreement are seperate forms. We have done that because we operate in more than one state and seperation of forms is the most conservative approach with all state's law.

The additional rent credit is not refunded if they leave because it is only a "memo" entry on the books that reduces the sale price of the home IF they buy. Most banks will not perceive the extra money as funds given to the seller; only as funds that reduce the price (big difference when the buyers are trying to come up with a certain percentage down) The exception to this is if the potential buyers are renting the home clearly above market rent, then the banks can look at it as additional funds tendered.....but they still don't get it back if they leave early.

We have a multi-layed system for repairs. The tenant inspects the premises to make sure everything is fine. We handle all reimbursement of repairs the first 30 days unless it was negligence. (Water left on in the tub and they walked away and it flooded the upstairs)For the next 11 months we handle all repairs over $1000 upon our approval and using our contractor. After the 1st year is over, they handle everything except structural and mechanical. After the 3rd year,(if it goes that long), they handle everything.We try to treat them slowly as homeowners so they start to behave that way and buy the house. But we always want to make sure we protect our investment.

We always take care of the insurance and the taxes because 1)it is still our property, and 2)you must be able to show that you control the property so you can evict instead of having to foreclose.

Assuming the people pay on time, (we use automatic debits from their bank account) we leave the people alone EXCEPT we visit each home twice a year (when the time changes)to replace the smoke detector batteries. That is when we just casually look around inside. Very non intrusive.

I hope this answered all your questions.

Very well put responses. Thankfully I said that most of the details can be negotiated. Very glad I did.
I really like the way you both have set things up and the reasoning behind your decisions. Anyone can understand that in the end you are protecting that valuable investment.
I am going to call my potential prospect and I will have these posts up on the screen.
A cheat sheet!
Lauri

WOW! Guys all this banter back n forth over L/O's n eqitable interest, and rather T/B's get anything back if they default was entertaining and inforative. So thanks to all of you, I think I have a handle on it now. I'll go with the three forms and call it a day. The more paperwork you have I believe only covers your rear if some one With that uncle that will try to help them sue you, the better off you you will be. Remember that old saying CYA. And P.S. I hope no one finds that last piece of advice offensive.

Thanks Eric

Gceriani, I like your wisdom as well. You have obviously been in the game a while and have alot to offer us newbies. Thanks for your input and advice.
Eric in Topeka.

Ms Rudolf I love your quote. I agree!

Has anyone done a lease option on a multi unit property? If so how did you construct the deal? Has anyone done a lease option with no or very little money down? I’m extremely interested in this technique and I would like to work or learn from anyone who is actively doing theses types of transactions.

informative post. Thank you

Thanks for this forum, I love these and i thick there will be alot of these for awhile. It seems that the Lease Options that you are talking about are already purchased properties?
I am interested in doing Sandwitch Lease options. What would i do to lock these up with a seller and with a TB what forms are standard to use and what should be recorded at the court house?

Thanks Jay C

Thanks for all the info, it answered alot of questions that I had!

Another quick question... So if they pay a $3000 option and then $500 a month towards the equity of the home and after one year they purchase the property do I have to come up with the $9000 they came up with through the year for a down payment or does it just come off the sale price?

It is just deducted from the sales price. It would be on a "credit" line of the purchase/sales contract, just like a normal deposit.

"I am interested in doing Sandwitch Lease options. What would i do to lock these up with a seller and with a TB what forms are standard to use and what should be recorded at the court house?

Thanks Jay C"

Would one of you guys who are proficient in this pls break down which forms for each A & C? A=original owner, B=me, c= tenant/buyer?

Also, what is recorded at court house?

Thanks!

It would be great if someone could answer this question, im just curious and absorbing. ^.^

JP

OK, JP,

I think I can answer my own question now.

for the seller (A), use forms:

1) Contract for the Sale of Real Estate
2) Agreement to Lease with Option to Purchase (looks like it need to be notarized)
3) Authorization for Release of Mortgage Information (so you can get info from the lender)
4) Memorandum of Option (must be notarized and this is the one you file at the courthouse)
5) Affidavit of Liens (sworn statement signed by the seller disclosing all liens on the home)
6) Seller's Disclosure (seller must disclose any problems with the home)
7) Lead Based Paint Disclosure (homes built prior to 1978 often used lead based paint. Federal Law says you MUST use this)
If you can get the seller to sign the Deed and have it held in escrow by an atty or title company w/instructions for its release

For the T/B, use forms:

1) Regular Rental Agreement
2) Contract for the Sale of Real Estate
3) Agreement to Lease with Option to Purchase
4) Have them sign a Lead Based Paint Disclosure
5) Sign Seller's Disclosure

OK Everybody! Did I leave anything out?

Karen

Edit-The icon above was supposed to be #8 but the computer replaced it w/icon.

I just looked at this real quick but it lookes like someone is doing there Homework!! Nice Job!!

Jay C

It depends on how the lease is written, ie: the option clause, that allows them to buy the house. Option clauses can be written almost any way. It's best to consult with a real estate attorney, in case you have to exercise the clause and it's challenged in court some day.

Thanks! I HAVE been doing THAT! I like to have my ducks in a row.

Now I just have to get sellers!

Karen

All of those questions depend on how you write your contract and how generous you want to be during that process. Always remember you things to be a win win situation but we are here to make money at the same time.

Bandit signs everywere WE BUY HOUSES!!

It works!! Make a Cash offer. If not interested Then ask if they are interested if you would pay there morgage till You sell it..

Try it it works!!

Jay C

Unfortunately, bandit signs are illegal here

I would love to be able to use them.

If you have a phone number on the signs like a google voice number or something like Tracphone, it would work. Any phone number that's untrackable or untraceable. Make sure you put them up high, on a wooden pole near intersections. That way, they can't get to the signs and they stay up longer. Make sure they are around major intersections, and any on ramps. You can even nail little wooden garden posts to the signs and hammer them in the ground. If you can do it during early morning hours when nobody can see you, that works too. Put them out on Thurs. or Friday night, and take 'em down Monday morning, to avoid the sign cops.

And, using craigslist can help find you buyers of all types. It's all in how you word the ads, too.

I hope these tips help you Karen or anybody else. (:

put them up around the house in the neighborhood, on the property (if possible). They should run out to around 1/4 mile up to a mile or 2, and around major home improvement stores like lowes or home depot's exits. you can also try shopping centers or strip malls. And if you have the $ for marketing, consider having a business host your banner on their building or something like that.

Also, consider using "car magnet" signs on your car(s) or a friends car. They're inexpensive and they are seen by everyone when you go to the store or you're stopped at a red light or wherever you are. You can do them for both buyers and sellers, too. Depending on the sizes you get, you can get a decent deal on some for under $60 or less... There was a youtube video on "we buy houses" car magnet signs, but I can't find it anymore. And, you don't have to worry about the sign cops, either. (:

Thanks for the input. You have some great ideas.

If you get a chance visit my journal. I love having company.

Karen

Hey DG family...its a wonderful movement by the way. I have a great question.
What type of homes could i lease out to do lease option. For an Example:
REO's, FSBO, Sellers who are helped by realtors, probates???? How many of these type of purchases could i do with lease option??? Thanks in advance.

This kind of infor (the detail nuggets) does not appear on run of the mill sites, except for here. I wish I had a photo memory, and since I dont I bookmark and re-read, and re-read until it is clear and burned in the ole "noggin"! Thank you sooo much.

I'm with you Steve, that's exactly what I do. Hoefully I can get a good fire going and it starts burning faster

Hi Bill,

I really enjoyed your posts on L/Os.

Would you be willing to share your Lease Agreements and Option Agreements?

Thank you,

Kurt

that some people who have been in REI forever do not remember when they were new and just learning the business. They too had many questions and concerns, no doubt, before just "getting out there and doing something". I come on this site not only for the comradie, but for the knowledge and support that I know more experienced REIs can give me... and who have done so freely I might add. When I have a question, no matter how stupid it may seem to those more experienced, I always get an answer that is beneficial and that helps me clear up certain questions. If I don't understand the answer, most everyone is willing to go the extra mile to try and explain further so that I can understand. I speak not only for myself, but for other new REIs because I have seen how their questions are answered too. I'm not referring to paralysis of analysis. I am referring to getting some things clear before you go and try to do something that you don't understand. Knowledge is power and as new REIs, we want the power of knowledge. I thank everyone who has helped me so far whether in forums or in PMs, and I will continue asking questions when I don't understand the specifics of a certain issue, and knowing the DG family as I already do, I will get an answer in some form or fashion... just saying

PM me your personal email and I will send info on where to get state specific contracts and copies of mine so that you can add some clauses that are not necessarily in the ones you order.

Mine have been approved by Bill.

Karen

Very well said, Shirley.