Is This Legal?

I think I may have come up with a win-win situation for myself and my tenants. Please let me know your thoughts and if my idea is even legal.

My husband and I are wanting to move to GA. We have two rentals plus our own home to sell (the rentals would be in a 1031).

My idea to save myself the nearly 6K I'd have to pay a realtor in commission ANYWAY for the sale of our home was to offer my tenants a short-term loan of two years for the 6K they would need as a down payment on my property. Or 5K to purchase one of the rentals, which are valued at 65K and 55K.

I would have to have an attorney put together the legals to it, as I DO want that cash back. My other self-protection thought was NOT to tell them we are moving out of state, but have the payments sent to a local P.O. Box (I have to contact the post office, never had a P.O. Box before). If not there, my parents have a Florida address and we can just get the money from them.

This way I get my money back over time, and they get a home that they may not have managed to save the money for in a few years. I looked up the payments they would have through a bank, plus the property taxes and the home insurance, and they would still be paying less in mortgage than they would in rent, even if they bought our home.

I would NEVER have considered this for any of our previous tenants, but our current folks are pure gold. Nice, honest, hardworking people - my husband and I both feel they deserve the "leg up" into home ownership.

All of this is theoretical - I know it depends upon our tenant's deciding if they want to buy or prefer to rent, or if their credit is good enough that they can qualify for a loan (one tenant has no credit - they are in their 60s and have paid by cash or check their entire lives).

Any advice/counsel for or against is welcome. Thanks!

Comments(4)

  • linlin15th December, 2004

    sounds like a lease option arrangement. That is legit.

  • getgoing15th December, 2004

    Lady,

    Sounds like a good deal for the both of you. Another option is to add the 5k to the purchase price and get it on the other end...

    Good Luck

  • getgoing15th December, 2004

    One other thought, make sure they use a lender that will allow the down payment to come from a source other then themselves....

  • LadyGrey15th December, 2004

    Thanks.
    My dad didn't like the idea, and I respect his opinion. His fear was that the tenant could just walk off with the money. But that's what the contract is for - to prevent that possibility and leave me legal recourse - just in case.

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