Land Contract
In my area, we call these Installment Sales Contracts - where you hold the deed and your purchaser pays you monthly. Usually there is a balloon.
Yesterday my son was next door to my one property and he said they had ripped out all the carpeting. He spoke with the tenants, went inside and the guy had replaced all the carpet (I was teetering on replacing it myself before renting but decided against it). Today on the voice mail the guy is asking about insulating the attic.
I didn't give permission for the carpet to be replaced but apparently he's done a good job. I did tell them they could replace the ugly wallpaper. But, I don't want him to spend money and then think I'm going to reimburse him or him to get mad when he leaves and take 'his' improvements with him. I also don't want him touching the electric or plumbing or starting and then not finishing projects. I'm going to go and talk to them both on Monday.
My question - if they want to keep improving the property, I'm thinking about asking them if they want to purchase it on an Installment Contract. That way, they keep improving it and also will take over the taxes & insurance. I know I can add $15,000 to the price I paid in August.. My interest rate is 5.58% for 20 years. I figure if I will offer them 9.75% for 30 years (I don't need a balloon). I'll have the place paid off in 6 years by applying their entire payment to my mortgage. I figure they'll save approx. $100-$125 a month compared to the rent.
if they walk within a year or so I'll lose some money, other than the improvements they appear dead set on making.
Does anyone have any idea how many people default on these contracts?
I will naturally have to talk to my acct (he originally told me I had to hold properties for 2 years but I'm thinking Install. Contracts might be different) and my lawyer.
Any thoughts?
You could also consider a long term lease option.
I'm almost positive that in my area you must foreclose as long as it's their primary residence. I'm not too concerned with that because I think most times you can work with them to get them to go amicably.
My toughts are this guy would go like gangbusters at first if he thought this house was truly his and then slow down. I'd be the one to get the benefit of his improvements. I am concerned if anyone has any rough statistics on how many default. i.e., posts on rent to own topics state most of the options are never exercised; on the mobile home info, DOW appears to actually count on a certain number defaulting so you take the home back and start over again w/a new deposit and new payments.