Buying primary residence and rent out right away.

[Hyunwoo Shin]

Hi, I'm getting my first home it's going through appraisal.

My question is is it smart move to rent this property as lease option? or just regular rent?

I know there is little chance of tenant would buy it in their first 2 year contract but highly not.

I wanna hear some opinions and suggestions. 

Thank you!

[Jon Holdman]

Originally posted by @Hyunwoo Shin:

@Jon Holdman

That's true but life is unpredictable. I could lose my job tomorrow or this location is not working for me then I can definitely buy a new house and rent it out. That's what my realtor and mortgage broker told me.

True, I'm not really "rent" the property but there is 90+% chance of people don't buy the house. So I think this is still a good REI tactic?

Buying a house then renting it after a life change is usually not a problem. It can be a problem if you're buying with a program that has an explicit residency requirement. But if you get a conventional OO loan, and end up moving for a job change, usually renting the property is not a problem.

Buying with an OO loan with no intention of living there is a problem.

Selling on a lease option with the expectation your buyers will not buy the property is also a problem.   Lease options can be a reasonable way to buy.  Less so for selling because it violates the due on sale clause.  While its rare, lenders do sometimes call loans in situations like this.  If that happens, can you fix the problem?  That is, pay off the house or somehow raise money to deal with the call?  Because if you cannot and the bank forecloses and your buyers lose the house then the buyers will come after you.  You also want to be sure the terms are such that you can pay off your loan if the buyers do choose to exercise their options.

Lease options can be structured in very predatory ways.  For example, putting a lot of conditions on the option that a buyer can easily violate.  You keep their option money, kick them out, and repeat the cycle.  And I've listened to gurus describe doing exactly this.  Crap like that leads to more and more laws on regulations.  Don't be that guy.  If you sell with owner financing make sure you buyer can actually buy and assume they will.