Lease/Option Questions For Two Current Properties
I currently have two properities that I have been rehabbing and are very close to being marketed for sale. I was planning on just selling them by owner but I am wondering if Lease/Option would be a better way to go.
In total properties are worth 220,000 FMV and I have a total of 165,000 into them. Are these properties good candidates for Lease/Option?
If so how would you market them? Where can I get the appropriate forms to pull these deals off?
What pitfalls should I avoid?
etc.?
Thanks
ckdonley
The main issue to consider is the type of underlying financing you have in place. Personally my financial statement isn't that strong yet so I don't have the ability to qualify for dozens of mortgages for single family homes.
What to do is really a personal choice. I prefer to cash out my rehabs and use the money for the next project, but that's just me.
If you do choose to do a lease option, or even a land-contract (contract for deed...same thing), I would advertise it with no bank qualifying, 1-2% down for lease/option and 3-4% down for contract--at least in my area--you should check your area to see what is the norm.
I would strongly recommend you have your attorney draw up your first set of docs. It is relatively cheap (compared to the downside of doing it wrong) and you'll have the forms to use for life.
GOOD LUCK
I would buy conti's book or patton's program where they spell it out for you. LO you can sell for over the top of the market due to favorable terms. I am in a small market, and yet we see 15K option money on 100K houses.
LO is good in that there are three profit centers; option money, spread from payment, back end when they refinance.
How much option money should you get? "as much as you can". Use hand written signs that say "rent to own" & no bank qualifying.
Show the property to groups at a time and have them fill out a questionaire that includes the amount of money that they can put down on the property.
[addsig]
Thanks for your replies. As far as my underlying financing, I have basic fixed rate mortgages on these properties. On one property I have a mortgage of 50K and on the other 73K.
On the 50K house I have 30K cash into it and on the 73 K I have about 12K into it. Both houses are worth 110K.
I could probably sell them outright and take the cash at closing but I am concerned about the tax burden on that money. If I lease/option them and pull out all of the equity via a home equity can I avoid the tax burden when the tenant excersises their option and closes on the property? :-?
Thanks for your replies. As far as my underlying financing, I have basic fixed rate mortgages on these properties. On one property I have a mortgage of 50K and on the other 73K.
On the 50K house I have 30K cash into it and on the 73 K I have about 12K into it. Both houses are worth 110K.
I could probably sell them outright and take the cash at closing but I am concerned about the tax burden on that money. If I lease/option them and pull out all of the equity via a home equity can I avoid the tax burden when the tenant excersises their option and closes on the property? :-?