Lease Option Help
Please explain how this lease optioning works!
I collected $4000 from a prospective lease optioner yesterday. They can only afford 1300 monthly however, and at that rate I cannot set anything aside toward their purchase.
Is it possible to do a l/o where the only money towards down payment is what they give as option consideration?
Will they ever be able to buy if no money is accumulating toward their down payment?
The purchase price in a year would be 130k, or thereafter increase by 5% a year.
I'm floundering here, have a super eager buyer, a property manager who's saying he lacks experience in lease options and doesn't want to touch it. And I am here as the seller saying I'd rather let the deal fall through than to do it wrong. I don't want to get burned.
I don't mind how long they lease option is, by the way. Could be years. We really only intended to lease it, but they showed up while I was doing the yardwork, viewed the house, loved it, and got out their checkbook!
Sounds like they will do anything to make this deal work but $4000 isn't enough to buy a house is it?
I might also add that these folks seem pretty gullible and aren't especially trying to educate themselves. With that in mind, one of us has to know what we're doing!
Wendy
You had better know what you are doing. If you intend only to lease it, why are you doing a lease option? Realize that there is a good chance that they will buy the property.
I have a LO where there is not a monthly rent credit, as additional option consideration. It is not your job to save all the money they will need to buy the house. They might have to save some on their own.
Have you done any background chekcing on this people. They are tenants and you should have them complete a rental application and fully check it - including their credit.
As a landlord, people who ask few quesitons and quickly get out the checkbook usually have something to hide. They might not be as gullibly as you think.
Brenda
We are certainly open to lease optioning the property, and would love to sell it. The Dallas market is so soft right now, I did not expect someone to come forward with a lease option offer.
I took a full rental application and am having my property manager process that as well as run his credit.
The tenant was very honest about his credit issues.
So...you've told me to be careful, which I am and will, and I know to qualify the tenant. Can you tell me more specifically about the lease option agreement itself?
I have structured similar L/O before.
Congratulations, by the way.
Ok, This is how I would handle this.
$4000 as option money( $2000 going to purchase price)
Put the house on a 2 yr L/O
Make the purchase price $135k after the two years
Give them the option to renew after 2 yrs, with an additional $2500 non refundable option money
I do 5% increases on the home every 2 yrs, plus a 5% increase on monthly pmt
If you have any questions, let me know
Also, if it was a check, make sure that it clears first.