Bought The House. Got A T/B. Now What?
I just bought a property conventionally and am trying to lease option it. I will be meeting with the prospective T/B tomorrow. He and his wife want to acquire the property via L/O, but, like me, don't know much about it. He is coming with $500.00 "earnest money" which I will apply towards his option to purchase deposit. Know of any forms that are similar to a purchase and sale agreement except for L/O that is L/S friendly and make these funds non-refundable if he doesn't come through? (he wants to specify subject to a contractor's inspection and his attorney's approval so I would have to give him a few days to do this while the house sits empty). I am definitely in over my head. I cannot afford to let the house sit empty, but I also understand his need to do his due diligence since they most likely will really buy the property.
Also, can anybody recommend a good real estate attorney in the Atlanta area (Gwinnett County) with experience in L./O and Subject To deals?[ Edited by JohnCl on Date 09/26/2003 ]
Quote:
On 2003-09-26 23:35, JohnCl wrote:
I just bought a property conventionally and am trying to lease option it. I will be meeting with the prospective T/B tomorrow.
T/B stands for?
He and his wife want to acquire the property via L/O, but, like me, don't know much about it. He is coming with $500.00 "earnest money" which I will apply towards his option to purchase deposit. Know of any forms that are similar to a purchase and sale agreement except for L/O that is L/S friendly and make these funds non-refundable if he doesn't come through? (he wants to specify subject to a contractor's inspection and his attorney's approval so I would have to give him a few days to do this while the house sits empty). I am definitely in over my head. I cannot afford to let the house sit empty, but I also understand his need to do his due diligence since they most likely will really buy the property.
Also, can anybody recommend a good real estate attorney in the Atlanta area (Gwinnett County) with experience in L./O and Subject To deals?
<font size=-1>[ Edited by JohnCl on Date 09/26/2003 ]</font>
Okay- Not sure about all your abbreviations, but the Lease Option is simpler to undertand if you break it down.
1. You sell the couple an OPTION to buy the property. This document gives them the OPTION ( important - they are not agreeing to do it, only that if THEY want) to buy the property at an agreed price, term, and date. The cost of this option can be upfront or part of the rent. Be sure to check with your local mortgage customs. Many banks will not allow a portion of the rent to apply to the option or down payment unless that portion is "above market rent". If you do not have a form prepared by an attorney - get one .
I always invite the buyer to help participate in setting of the future price. We agree on an appreciation rate, then set the purchase price EVERY month say, starting in two years. ( Or whenever you wish). This means he knows what he will pay when ever he decides to buy.
Example: Market rent is $800.00. You charge him $1000. $200 a month applies to the downpayment along with his option money.. Note: this is not refundable if he does not buy.
2. You lease the couple the property. A standard, well written lease can be used. Over the years I have refined one that works wll for me.
There are tons of aticles and books on how to do this. I sugest getting an attorney that will prepare the docs and give them to you digitally so you can use them again in the future.
On more than one accasion for me, the option was not exercised and I got the house back. This has always worked out to my advantage because the appreciation has been better that the "agreed upon" appreciation in the contract.
Lease options are a wonderful way to build a real estatefortune. Get expert advice the firt couple times. Please do not count on comments in this forum alone.
I would rather buy single family homes, rehab them and sell with L/O than any other way.
In one case I put a contract on a house, ran an ad for a lease option, sold the option, used that money as downpayment on the loan, leased the house to the couple for four years, they got transferred, I got the house back, and I then sold the house.
On another case I sold a lease option with a portion of the rent appplying to the down payment. We inflated the purhcase price to that the buyer could show more downpayment - but when he went to finance the appraisal worked, but the bank would not let us apply the $500/month to the purchase price because the rents were not $500 above market. I simpy adjusted the purchase price down to effect the same result. ( This is why my caution on how much rent can be applied)
Good luck and good investing.
[addsig]
T/B = Tenant/Buyer.
L/O = Lease Option.
L/S = Landlord/Seller.
I saw these abbreviations in some other posts and just kinda adopted them.
John Clark
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GFous,
I am hoping to meet with a Real Estate Atty tomorrow. Thank you for your advice. Any chance I could get a copy of your "Option to Purchase Agreement"? I am using one I downloaded from ****Must Reach Senior Investor status before posting URL's*** after hearing good things about them. I will be running it by the Atty tomorrow. It would be great to have another one to compare it to and maybe get some new ideas. I'll be more than happy to let you know the result.
TYIA,
JohnCl
**Please See My Profile**
good contracts are worth it....
definately have them to your advantage..