Lease Option Company?/ Legal Documentation
I am a new investor who is about to start closing deals very soon. I wanted to know do I need to form a company for my investing or is this unnecessary starting out? Also where is a good place for me to look for well structured lease/purchase contracts?
Most people start with a sole-proprietorship and form a more appropriate entity later. Be sure to register your fictitious name with the county, if you use one. For sandwich lease options, you want an S Corp (to save that 15.3 percent in self-employment tax you would pay as an LLC), but if you are holding property (sub2 also) and renting out or lease optioning, an LLC is fine (rental income is exempt from self-employment tax). You would still pay the 15.3 percent on your salary in the S Corp, but you would make that as low as you can justify and take the rest as a distribution.
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Thanks for the advice, would you know where would I be able to find sample lease purchase contracts, or is this best left up to an attorney to draw up?
A good Course will give you sample Contracts and also instruct you on how to fill them out. There are some reasonably priced ones available on this site.
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Also SCREEN YOUR T/B THOROUGHLY!!!!!!!!!!
Background check and credit report!
Why not consider selling the property on a land contract or contract for deed?
You should consult an attorney. Best, Dave
tkorkow,
Glad to meet you.
So how are things in Green Valley?
You can sell with a Contract for Sale, hold the Deed (do not record) to your buyer until your buyer fulfills the terms of the Contract. In two years when he finances the property then you can give title to whomever finances the property.
Use a Loan Servicing Company (LSC) I would recommend US Loan Servicing in Las Vegas, they will keep a record of how your buyer made their payments, which when it comes time to re-finance it will help your buyer as it shows a lender timely mortgage payments..
Even with shaky credit a good mortgage broker can find a lender to finance the buyer and having a record of how your buyer paid will go along way in qualifying them. Also as a selling point they can claim the interest on your loan to them, the LSC will send them a 1098 for this deduction.
As far as qualifying the buyer , I would take their wrist and see if they have a pulse, if they have a pulse that means they have a heartbeat and a heartbeat and $15K they qualify in my book. If they are unable to finance in two years (you keep the $15K) then repeat the process for more money in your pocket.
Only having done this in your area a few hundred times is why I recommend doing it this way.
John $Cash$ Locke
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T, I live here in Vegas and congrats on this potential deal. Mr. Locke hit it on the head in regards to selling on a CFD. if you choose to do it this way.
If you go with the L/O remember you will not get as much down as with an owner will carry deal. I do not know your numbers on the deal but if you are getting 15k down with a seller finance, you might only get half that with a L/O/ and remember also that is a non refundable deposit if the T/B/ does not exercise their right to buy the property.
Also with the Lease option, the T/B will not get interest payment deductions becasue he has not bought it yet. I think Mr. Locke mentioned something about that in his reply.
Not to worry about the DOS either since transfer of title did not take place.
I am assuming that you got the deed and now you have a lot of options. The best to you and maybve our paths will cross one day. I am over on Flamingo and Maryland area.
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What Mr. Locke says is true. As a licensed Mortgage broker I will take a guess that if one can put down 15K, he or she has cash flow but bad credit. The only concerns that I would have in trying to finance this person at the end of the 2yr. for the cfd: are there any judgements not paid off, currantly in a chapter 13, IRS taxes not paid. Two years should be enough time for anyone to clean up the past!