Purchase Option With The Right To Lease The Property?
Hey board,
Just curious, is there a way to place an option to purchase on a prop. for say.....1 year all the while leasing it to a Tenent/Buyer?
Instead of leasing the prop. yourself, place a "with the right to lease" clause in your option agreement......
Is this feasible?/////Doable?/////workable?
Clif 
Not sure if that would be doable. An option is just that, an option. It gives you the choice to buy or not. However, I don't think you could put in a clause that allows you to lease the place to someone else.
I don't think a seller would agree to it anyway. They'd be left making a monthly payment while you'd be collecting monthly rent. Not a very win-win situation.
Roger
Hey! why not other people doing it. I believe the seller only need what ever money payment for the house according to the contract. Of course, you must let the seller knows by putting contingency on the contract, that you will lease the house to someone else. And your contract lease must long enough to cover the contract that you've with someone else. Otherwise, you are going to be in trouble.
Because you want to know that someone else would like to buy your property or not, before your contract leasing option to buy expire. Then you could buy the property or walk out.
Actually I was thinking that it would be just as a lease/purchase except without the "obligation" of having to pay the monthly mortgage. I'm not talking about having the owner pay the mortgage while I collect rent....c'mon Rog...I'm not new to this.....that would never work.
This was simply a hypothetical scenario to get opinions on trying something new/different...
If you're going to put an Option to Purchase (with the right to extend the option) on a prop. for a fixed term at a fixed price, I'm thinking why stop there, if your objective is to find a buyer for the prop. , why not have the (option) to lease it as well.......pay the mortgage from the new buyers while taking the monthly spread, then when the term is up, simply excersize your option to purchase and simultaneouly close with the new buyer on their L/O.
Freeing you from the obligation of having to (Lease it yourself) w/the option to purchase then sublease it to someone else.
Basically I'm thinking of just eliminating the risk of you not finding a buyer in the time alloted (meaning you'll have to start making the payments until you do find one).
If you find a buyer, great but why not have the option to also locate a rent to owner.
Just a thought.
Clif [ Edited by pbodys on Date 07/21/2003 ]
I know that your not new, but newbie may be reading this, so clarification is necessary. Also wanted to be sure that you weren't drinking too much
You know that if you can get the seller to agree to it, anything in a contract will work. My question would be what is the difference between what you're proposing and a L/O anyway? You're agreeing that you have the right to buy the property (the option) and you're agreeing to make the monthly loan payment until another buyer is found (the lease).
My stance on 'ways to eliminate your risk of not finding a buyer/tenant' are pretty strong, Clif. I consider that risk part of doing business in REI. If you use the seller as a crutch to eliminate your risk, it's not much of a win-win situation anymore is it? What are you giving the seller that he can't get on his own?
Roger
hey Roger,
Never touch the stuff, maybe I'll start to slow things down in my head
I'm not agreeing to make the loan payments, I would have the new buyers do that when I find them. However, if the sellers are going to give the option to purchase (without necessarilly leasing the prop. to me) why not also have the option to lease it to someone who may or may not want to buy right now....
It's still a win/win situation...
What's the purpose of an Purchase Option?
OK, you know that.
Now, what's the harm in adding a clause that states you're also allowed to lease the prop. for the sellers?.....(it's almost as if you're acting as a prop. mgr.).
There's still some risk involved on the investors side.....it's just been reduced because you're now not obligated to lease the prop. ,...only purchase it when the option comes to term.
You are still going to do you due diligence in finding a buyer no matter what....as a win/win for everyone.
Like I said, it was just a thought.....think I'll go and have that drink now....and slow things down a bit
Clif
Briefly, when you buy a property on a lease option, you are controlling possession of the property through the use of a long term lease, and you are controlling all the future appreciation of the property through the use of an option to buy. The seller stays on title until you exercise your option (either by buying it yourself or finding a new buyer to buy the property for MORE than your option price.
here is how you could do it. Its called a"sandwich" lease option which is an arrangement whereby an investor leases a property with an option to buy from a homeowner, then subleases the property to a third party with an option to buy; the investor helps the tenant obtain a loan, then exercises his option to buy from the owner and simultaneously re-sells it to the tenant in a double-closing. Hope this helps ****Must Reach Senior Investor status before posting URL's***ber it can be done.
Hey allandinger,
I know all about L/Os, did you read all the posts on this one?
My scenario was a variation from the standard L/O deal. However, thanks for your input.....
Next time please read the posts....
Clif
See what you've started, Clif. People's going to think you're a newbie.
Like I said, if you can get a seller to accept it, it'll work. However, I think that they'd have to be very motivated if they would even consider it. An option, of course, gives you the right but not the requirement to buy the property. It's extremely difficult to get a seller to sign a pure option even in short term. Signing a long term pure option would be, I think, next to impossible. Add to that the ability for you to lease the property without any liability of payment to the seller, you're climbing a mountain, me thinks.
Instead, you might try to 'sell' the idea of a short-term pure option to the seller (60-90 days). Word the option right, and this effectively doubles the amount of people trying to sell their home. Of course, you'll be looking for a buyer willing to pay more than your option price.
Make the option assignable, so if you find a buyer with financing you can simply assign the deal. Also, I put in a clause that says the seller can buy back the option for $xxx dollars.
Roger
Yeah I see Roger,
Good thinking, thanks for the input.
Clif