Should I Do This.
I have a duplex I want to get rid of because of the headeaches of the neighborhood. This area is an up and rising area but when you have a vacant property, kiss your appliances goodbye. Vanderlism is high. I only had the property for a year. I want to get rid of it.
Another investor wants to do a lease option. He will give me a $1,000 up front but wants me to pay the mortgage for the next 3 months before he starts making the payment. Also during this 90 days, he wants to collect the rents. He is proposing a 2 yr lease option and will cover any repairs $500.00 or lease. He will handle all tenant issues. What do you think about this?
I would not do that, he has nothing at stake. He could collect 3 months rent, pay nothing except a small $1K deposit, then decide to change his mind.
Thanks, I will wait until I found someone who will just takeover the payments from day one.
Ok, what about this? I just spoke to the investor again. He is willing to take over payments July 1st. He wants to do a two year least option. He said he will give me $500 at closing in which his lawyer will hold this money until then. He would be responsible for repairs $500 or less
I wouldn’t. Not unless I was really desperate. Even then, I doubt it.
Why do you call her proposal "faulty reasoning"?
If that is the deal she wants to write, specially since she already successful doing it on a "rent to own" basis....go for it.
There is usually an imbalance of knowledge and sophistication between a seasoned investor and a seller. This time you have the winning hand. Next time???
[addsig]
Back when grass was something you mowed and Woodstock was just a farming area noone had ever heard of, the man next door told me how his wife did this very thing. She would "sell" property to her tenants on a contract for deed with terms like, rent for seven years and then you own it.
You may know this technique by the name the IRS calls it -- an installment sale.
Most new investors (including myself) passed by the first good deal that came their way. They/we were too unsure and it seemed to good to be true........darn!
What pointers can you provide in structuring the deal so that I am protected as much as possible from the equitable interest claim?
Have good Contracts that state the T/B understands it does not create an equitable interest and that it is not any form of owner-financing. I will include some of my wording below as an example for illustrative purposes only. Make the Option and the Lease two separate Agreements. The Lease should not mention the Option. The Option should be contingent upon the lease.
TENANT/OPTIONEE UNDERSTANDS AND AGREES THAT THIS OPTION IS NOT CONTINGENT UPON TENANT/OPTIONEE OBTAINING FINANCING FROM A LENDER OR FOR ANY OTHER REASON AND THAT THE FAILURE OF TENANT/OPTIONEE TO PURCHASE SAID PROPERTY BEFORE THE EXPIRATION OF THE OPTION TERM WILL RESULT IN THE LOSS OF ALL MONIES PAID, AS WILL THE DEFAULT OF ANY OF THE COVENANTS OF THE LEASE AGREEMENT, AND TENANT/OPTIONEE FURTHER AGREES THAT THIS OPTION IS NOT AN AGREEMENT FOR DEED OR ANY FORM OF OWNER FINANCING, NOR DOES IT CREATE AN EQUITABLE INTEREST OF ANY SORT, BUT THIS OPTION IS SIMPLY A RIGHT TO PURCHASE SAID PROPERTY UNDER SAID TERMS AND CONDITIONS, WITH SAID LIMITATIONS, AND UNDER SAID TIME LIMIT.
[addsig]
I read you loud and clear, Wiz. In theory, it should work as you say; however, if a former Co-beneficiary starts making claims at the eviction hearing, the "uninformed" judge could rule that it go to a foreclosure hearing, whether that is the correct ruling or not. They have a seemingly valid claim, in that according to the IRS, they have a ownership interest for tax purposes.
[addsig]