New Investor Seeks Missing Link.
Hello all,
I am new to the board and need assistance with one item in regards to doing a Lease Option deal.
I understand the concept of using the Tenant-Buyer's option money for your possible up front costs to the seller, however, how can you be in receipt of option money from the T/B if you haven't given the up front costs to the motivated seller?
Obviously, I would think I wouldn't want the T/B to be in contact with the seller because then why would I exist?
I guess I am just confused as to the logistics of the process. Could someone please advise.
Thank you very much.
SacVestor
you have the seller under contract for x amount of option money with the right to rent, sell, or l/o the prop. you then bring in your tentant/buyer and get them under contract and get there x or xplus option money which you pay to the seller any extra that you have charged in option money is yours......... km
This is about the third time I have written this response. The difference between what is technically legal and what is practical is the stumbling point.
1. You can not sell an option for something you do not have. Hence you either find a way to get the option from the seller before you sell it or you use something like an escrow to make both sides happen at the same time. You could agree a deal with the T/B 'subject-to' you obtaining a option from the seller and agree a deal with the seller 'subject-to' you finding a T/B who agrees to rent the place. Juggling vs. a simpler solution below.
2. To get the deal up and running with the seller find a way to get the option started. You do not need to pay the option consideration in one go. Hence you should be able to find a small amount of cash to create the option with an agreement to pay more later (based on time or when a specific event happens). Maybe the small amount is all you ever need to pay!
3. There is no reason why you can not have T/Bs lined up on a list so that the timeline is short. Just an indication of interest from the T/Bs.
Conclusion...
There are some subtle things you can try so that you do not have to pay anything out of your own pocket. I think the effort and hassle to do this legally is not worth the overhead. Option consideration has to be something of value but it does not have to be a large amount so just find the spare $100 to get a deal up and running. If you can not find $100 then consider this as the task at hand. REI is about finding solutions. If you need to take a part-time job for a few weekends or hit up a buddy for the consideration then focus there. If the seller will not take a small amount and therefore does not really trust you offer something more valuable that you can redeem later (like a pawn shop deal almost). Title to a car is one example?
You can get burned if you are not clean with how you structure your options. One thing that will attract the wrong sort of attention is if you do a deal and misrepresent your interest in the deal. So, keep things in the right order and disclose all aspects as needed (do not say you own the place when you only have an option for example). Some investors provide a copy of the title report to clarify to the T/B just what they are likely to be buying.
John
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Thank you John.
SacVestor
Another question,
Will there ever need to be interaction between the t/b and the seller? Furthermore, will these two entities ever know that the other exists?
Can it be prevented? If so is it worth it ?
Thanks in advance.
SacVestor
P.S. If any of you investors out there need someone in Sacramento message me.
Hi SacVster,
If you structure your contract to
read seller will continue to pay atleast
3 to 6 www.mon.mort/payment because your
comp,will be using your www.res.to advertise and marked their www.home.That gives you plenty of time to find a t/b.Always have
excape clause's in your www.contract.Tell them if a broker had their home they still must pay their mortgage.(Have a good day).
Very good Joseph44!
Thank you very much.
SacVestor
The promise to pay Option Consideration is just as good and legally valid as paying it. If your Contract is written properly, you will give money to the Seller (as little as possible) only after you find a suitable T/B. The Owner should know you are putting a Subtenant in the property. The T/B should know you may not be the Owner (disclose it in the Option). The two likely will never meet.
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Thank you LeaseOptionKing!
Progress to come.
SacVestor