Question On Payments From Buyers
Hello,
I'm still trying to fully understand how this works. My question is about the monthly payments from your buyers. I understand that it goes to pay off the original loan +gives you any extra money according to your terms.
But, does that payment apply to their purchase price? Like if the agreement called for a purchase price of 200k at the end of two years. They've made 1k payments every month for a total of 24k at the end of 2 years. Does that mean they owe 176k at the end?
It depends on the agreement you have with your buyers. I don't think it would be wise to give 100% rent credit towards the down payment. Depending on how much the monthly payment is you may choose to give the buyers some credit towards the down.
Andy
Ok that makes sense. Also, I assume their down payment I collect DOES go toward the final purchase price?
Any money which will be applied toward the down payment should be clearly stated within the lease contract.
[addsig]
I seemed to have read that you should never call it a down payment but "non-refundable option consideration". This way if they don't buy the house, you keep the money. Call it a down payment, then they would get it back.
Quote:
you should never call it a down payment but "non-refundable option consideration". This way if they don't buy the house, you keep the money. Call it a down payment, then they would get it back.
This only is true for a lease option. You could also let them buy it from you with a down payment, and owner finance. This way when they default on you, you can demand the balance owed to be paid in full. You can then make a deal with them to leave the property, or foreclose on it. You would ultimately remain in possession of the property and could then resell it for a repeat and hopefully a better turnout.
This would be more attractive for potential buyers because they would actually own the property. The payment they make would be just like a mortgage payment so that (at first) most of it would go to interest, but they would be gaining equity at the same time.
Anyone have any other ideas/methods?
iglooman
[addsig]
Have you actually done this iglooman? It sounds feasible. The only problem is the equity that gets locked into the property (unless you create a second and discount it for a cash pay out).
This could get interesting during foreclosure, because you would actually get free money out of the deal when the second is dismissed! It seems like there should be some sort of law against that...
But it does sound pretty interesting!
-Brandon Richardson-
Come to think of it, you could make a pretty lucrative business out of selling properties to extremely high risk buyers, and actually making money when the property goes into foreclosure... But that just sounds completely wrong... Any body out there wanna make an argument as to why this sort of business would be illegal? Actually, I am going to start a new thread for that purpose!
-Brandon Richardson-