How can I sell a property that I have leae purchased?
Hi,
I will be lease purchasing a property from a motivated seller. Here are the details. 3-year lease term with option to buy it for 150K. Monthly lease payments are $1000.
I am planning to do a rent-to-own on this property for $1200 a month for 1-year with selling price of $165K.
My question is, if at the end of one year my tenant-buyer wants to buy, how can I sell the house since I have a 3-year lease term with the original seller.
Do lease purchases of 3-year terms usually say, "3 years or earlier" ?
Thanks,
AC 
yes - make the term say "on or before 3 years"
also make sure your lease option has a sublease option.
Thanks for the reply. Another question related to the same deal is, in order to sell this deal to the seller I told him that I would "definitely" buy the property at the end of 3 years.
Now this would not be called a Lease Purchase "Option" since I do not have the option to purchase, I MUST purchase.
Has anybody done/heard this kind of a deal?
AC
OK - first of all you are getting out of my area here, I only know what I read on here...
What I think you may want a contract for deed. Basically a contract that when you meet the requirements of the contract you could get the deed.
A contract that says you agree to pay $1000 a month with a lump some payment of $150K with in 3 years. When you do that you get the deed.
I would wait though until some of the experts speak up here
No, what I really want to do is a lease purchase. i.e. lease the property with the right to purchase it anytime in the 3 year period.
The only difference from what is traditionally done in L/O is the "option" part. I am OK with making a legal commitment to buy. Thats what will make the seller more comfortable (that he does not have to think about selling/renting the property again).
expert comments are welcome on this.
Thanks again.
Some people will say that a Lease Option = a Lease Purchase.
The way I look at is like this:
Lease Option - I am offering to lease this house from you, will pay you an Option price of $1000 for the right to buy the house at X price in 24 months. I can walk away if I want.
Lease Purchase - I am offering to lease this house from you (maybe to build credit), will pay you a Lump Sum of X, to be deducted from purchased price, and will buy the house from you in 24 months.
This is the way I look at it. But like the other poster said, it sounds more like you are doing a contract for deed. Several Lease Option folks I have run into say the Lease Option = Lease Purchase. I just posted my view on it.
In my opinion, I would do a true Lease Option. You don't know what will happen in two years.
Ho....
ps. and if doing an option, be sure it can be exercised at any time up to the expiration date. Maybe even put a provision to extend by 6 months.[ Edited by HoGiHung on Date 02/11/2003 ]
Thanks for the reply again.
Can you tell me exactly how does a Contract for deed work? And how is it different from a Lease Option?
AC
With a Contract for Deed you agree to pay the seller X amount per month till the debt is paid off. At that time you get the deed.
With a Lease Option, you lease (rent) for X amount and pay Y amount as your "Option". Your Y amount is non-refundable. If you decide not to buy the house, you loose that option. If you decide to buy, that Option normally goes toward your down payment and you would need to finance the balance of your agreed upon price - your option - any rent credits. With a Lease Option, you control the property but NOT the deed.
Ho...
Hey ThERe
Why not just get the property tided up with a purchase option with a term of 30-60 days located a tenant buyer and lease option that option for a bit longer than you have it for and for about 5-10 thousands more in price and sell it.
Owner gets what you agree on with him at sell and buyer in lets say 24 months gets his financing for the deal you have with them and you walk away with 24 months of small monthly payments ( the difference from what you are paying )and downpayment as well and of course the difference from your purchase agreement with owner from your agreement with tenant buyer. this is a long term deal but sweet.. and you can also give the new tenat buyer owner financing for the price you agreed with them over the price you have agreed with the original owner.
Just another way to make a deal work with options.
Good Luck,
Manny
JMC Investments & Loan
It appears that many posters think that a lease option is the same as a purchase agreement or a contract for deed. There is a significant legal difference between these instruments.
A lease option is a normal lease with the "option" of buying; i.e., meaning you are not obligated to buy the property. A contract for deed is a real estate purchase agreement where title is transferred at the end of the contract (when payments have been made), but the sale has occurred at the time the agreement is executed. If your seller is trying to delay the gain on his sale for 3 years, he will not be interested in a contract for deed now because the contract will result in an installment sale for tax purposes. On a real estate purchase agreement, unless you have appropriate and real "escape clauses" you will be obligated to purchase the property at the end of the term, not before (unless the agreement permits you to purchase the agreement before).
The least risky situation is the lease option, but you get no depreciation deductions. Unless there is a restriction in the option agreement, an option can be exercised at any time. Therefore, when your tenant exercises his option in 1 year (if he does), you can exercise your option and set up a simultaneous closing with the title company (or escrow agent).
Hope that helps,
Taxjunkie
Rather than a lease option you want to do a contract for dead with a balloon. There are a couple of advantages other than depreciation.
1) you generally do not need the sellers permission to sublet.
2) The documentation is actually easier than a lease option.
3) your seller will be a little more confident that you will close at the end of the three years
4) three years from now you will qualify as a refinance rather than a purchase (as in a L/O) the underwritign guidelines for refinances are a little more generous.