Can you do this?

[Account Closed]

Step 1. Make a year lease with a tenant

Step 2. Sign a purchase agreement to close the date that lease ends

This was suggested to me by my CPA. He didn't know if you could actually do it.

[Albert Bui]

Originally posted by @Aaron Montague:

@Account Closed - can you fill that detail in?

Any interest on Earnest money, whether collected at once or over a year as part of a lease option, is due to the buyer at closing.  I don't know the details of holding escrow money, but I know banks are always happy to have your money interest free :)  I don't see any risk for you on this deal.

 This brings up a few things:

- 1) dodd frank potential and legal issue (just had a webinar with clint coons, an attorney about this) if a part of the rent goes towards principal reduction it can be "deemed," but not necessarily construed as seller provided financing

2) from the end of conventional financing yes how fannie views this is that portion that is determined to be above market rent is or can be considered as the "leasee's funds," or borrowers funds as its viewed as principal contribution. Another view point is if the principal pay down or contribution amount can also be described in the lease agreement or option contract but if its not detailed or explained then fannie reverts to its default rules above market rent.. etc

Clint and I talked about just reducing the potential sales price at the end by the amount of the "principal reduction/contribution," to avoid potentially red flagging DF rules. The otherside of the coin is to have a licensed RMLO (reg. mtg loan orig) underwrite the deal.