Help a Newbie Answer This Burning Question

Comments(5)

• 
  rajwarrior26th May, 2003

  So you've already discovered the perils and pitfalls of lease optioning as a form of buying. While I think it is a good method of selling/renting your properties, it's not the best way to get them, for the reasons that you mentioned. Add to them since the original seller still owns the property, you run the risk of them refinancing for more than your agreed purchase price or going bankrupt, or simply not paying the bills on the property.
  
  If you're still interested in this method, maybe some of the L/O guys can help you reduce these risks, though you still have the problem of not owning the property. Another method that you may like is the subject to method of buying. It's actually similiar to a L/O but you get the deed. You own the property. Check it out before committing to L/O's
  
  Roger

• 
  Rowlandtissimo26th May, 2003

  Thanks for the message! I'll check out subject too right now

• 
  bginvestor29th May, 2003

  Here's some answers to your questions.
  
  What happens when the T/B wants to buy the house if he defaults on the lease?
  
  If the t/b defaults on the lease, he/she no longer has the right to buy the house. (Make sure your option contract states this..)
  
  Would you arrange financing with a bank to buy the house and then sell it to the T/B right away?
  
  Typically theres two ways of doing the the deal 1) Do a double closing (you exercise your option just before he does)
  2) Assign your option to the t/b and allow t/b to buy it from the owner.
  
  What if you had bad credit? Would you get a hard money loan, buy the house cash, and then flip it? What are some options?
  
  Assigning your option eliminates all of these issues...
  
  
  How can you guarantee the T/B wont back out after you buy the house?
  
  You can't , I've heard that t/b's only exercise their options about 35-40% of time. What do you do? Always make sure you have an exit, for example, make sure your lease term is long enough to support another t/b (3 years).
  
  
  Best Regards,
  
  Bginvestor

• 
  RALPHN50431st May, 2003

  what is a t/b and t/l? thanks-i am a newbie

• 
  rajwarrior31st May, 2003

  T/B = Tenant/Buyer: the person that you put in the property on a lease/option, lease/purchase deal
  
  T/L = Nothing, never saw it before.
  
  L/O, L/P = A lease/option or lease/purchase.