Lease Optioning Rental Property To Investor?
I have 2 houses across the street from each other that are just too far away from me to manage efficiently. Both are rented.
Both are in loans with a 2 year prepay penalty about six months in.
I would like to sell them to an investor that works more in that area, and I am willing to owner finance for the next year and a half to clear the prepay penalty. I will let them take half of the positive cash flow and half of the equity build (Zip Code 30297 went up 5% last year).
I will list the properties here. Has anyone ever lease optioned already rented property? Is this possible?
I am also considering a Contract for Deed in place of a lease option agreement.
Pros and Cons?
TYIA,
JohnCl
:-o I am currently on the purchase end of 2 lease options that were rental properties through a management company. It works out great for both of us, I get in with almost no closing costs, etc on a 10 year amortized fixed payment schedule. On the seller end if I do not pay I can be evicted (even though I do not live their) and they get the property back quickly, and I can pay the property off at any time.
Although I have not personally done what you are proposing, it is often done and I would certainly consider it.
In terms of lease/option vs. contract for deed you need to check your state laws. Personally I like contract for deed because it gives the greater illusion to my buyer that they now own the home. My state has very simple forfieture of contract rules. I simply give 30 days notice to cure.
Some states, notibly Texas if I recall, must foreclose on contract for deed properties. Because of the time and cost to get your buyer out, I would be swayed to use lease/option.
Although many investors' goals is to get into properties no money down, It is statistically proven that the more of a down payment a person puts down, the less likely of default is. If you were planning to accept nothing down I would strongly consider asking for 1-2% down. If the investor is not able to come up with this pocket change to throw into your deal you may want to reconsider.
You say that you would like to use an equity sharing type agreement. I am not sure if a lease option or contract for deed would allow you to do this. I have never done this as an exit strategy so others on this board will need to advise you.
GOOD LUCK
So just write up another lease for the investor subject to the existing leases?
JohnCl