Newbie Question Regarding Lease Options

Comments(6)

• 
  active_re_investor1st March, 2004

  Quote:
  On 2004-02-29 19:01, joefm26 wrote:
  Hi I am new to this forum and to investing in general. I have done quite a bit of reading on the subject and really like the lease option method. I do have a few questions though from those of you that have experience doing these ty[es of salea. If there are other threads that already address these questions, please just point me to them.
  
  First off, If I an doing a lease option with a seller and a buyer, is the general idea that they don't know the other exists? Won't the seller get ticked if they know that am leaseing out the property to someone else for more than I am paying the seller inthe 1st place? also I am not entirely clear how the title and deed work with the property. If I do it as a land trust with me as the trustee and also as the benificiary, is the title then in my name as well as the deed?also won't the buyer realize that I am not the real owner of the property when we sit down to do the closing?
  
  Thanks for your time
  
  Joe <IMG SRC="images/forum/smilies/icon_smile.gif">
  
  
  Sticking to a L/O.
  
  You need the right to sub-let. Hence the documents will indicate to the person you have the lease with that you have the right to sub-let. How much is not really their business but they might come to know.
  
  If you are solving their problem (repairs, vacancy, etc) they should not care that you are making a buck on the deal. It provides a solution to them and they will likely be happy to have the solution for what they feel is an acceptable price (your profits).
  
  As to the land trust. You are confusing two things. A lease/option does not transfer title. A land trust is normally used where there is a sale but the title is held in the land trust. I am not going to try to explain the finer points. Just consider the fact that you can do a lot of L/O deals without a land trust and you can do a lot of purchases with a land trust and never do a L/O.
  
  John

• 
  joefm261st March, 2004

  Hi Thanks for the reply but I am still a little confused. I thought doing the land trust with the L/O was a) so that I would have control of the property and b) to avoid triggering the DOS clause of the mortgage?
  
  Thanks
  
  Joe

• 
  joefm261st March, 2004

  I read a few other posts maybe I can answer my own question and you guys can tell me if I am right . When I do a L/O, it is the sub 2 portion of the contract that allows me to re-lease it to a tenant buyer. is that right?

• 
  steeler191st March, 2004

  Sub 2 simply means you are buying a house "subject to" existing financing. The reasons people use land trust is to prevent or delay mortgage companies from finding out and calling the loan due. Of course if they actually do this or not is debatable. Many people feel that as long as the check is on time and for the full amount of the payment they won't care.
  
  You don't need to combine to a sub 2 to then do a L/O. You could L/O your primary residence and use the money to buy a new house. Or you could L/O any property you own.
  
  You could also buy a house sub 2 and sell it at FMV cashing out the equity and appreciation (minus selling costs and repairs needed) thereby never doing a L/O. Or you could simply using it as a traditional rental. Or any number of other options
  
  These are two different techniques that can but don't have to be used in conjunction.
  
  Roger

• 
  NancyChadwick1st March, 2004

  Not sure I'm following you here.
  
  If you're doing a lease with an option to buy the property, you're not getting title to the property until and unless you decide to exercise the purchase option. In the owner's eyes, you are a tenant who may buy the property at some point in time.
  
  If you want the right to sublet the property, make sure that's in your lease with the seller as well as the right to "assign" the purchase option aspect of the deal.
  
  Don't see where "subject to" comes in here until or unless you decide to purchase the property.

• 
  bgrossnickle1st March, 2004

  Buy Wendy Patton's material on L/O available on this website. She goes into depth about buying on L/O and selling on L/O. She certainly would use a subject-2 if that is an option, but that is not her primary focus.
  
  You are not going to get the education you need to be successfuly by asking questions on this website. This website can fill in some of the blanks, but it is no substitution for good course work.
  
  Brenda