New investor would like some guidence

Innovative Strategies
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New investor would like some guidence

Account Closed
San Dimas, CA · Member since 2008 · 3 posts · 0 votes

I am interested in doing creative financing.... Lease Option Purchase....Assignment of Contract, etc....

If I understand....first find a property..... preferably FSBO.... work out a deal with the seller where I give the seller X $ amount such as $4000 plus a monthly payment .... and the option for X amount of time........

at this point does the lease option gets recorded or how do I protect myself from the transaction?..... what happens to the deed?...

now... I find a buyer who is willing to purchase the property.... what happens next?...... we draw a contract to purchase.?....o will it be an assignment?....or simply another lease option?......

next....we are ready to exercise the options......

my option with the seller.....and the option with my buyer....

how is it handled at this pont and by whom?

how is the money disbursed?....meaning....my buyer pays for the proptery.....seller gets his money.....and I get my share as per the purchase option with the buyer?.....

I've never done any deals and would appreciate any imput, guidance for all of you.....

I do thank you in advance for your time and consideration.

Happy investing!!

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  • Lynn Z
    Member since 2008 · 689 posts · 23 votes
    20y

    I did a lease option for a gal dying to "buy" my mother's house but first, wanted to lease it for a year. She paid $1,000 for the option to buy. There were no additional amounts of money toward a downpayment etc. - just first option to buy in the contract. In the end, she extended her rental for another six months --- long enough to buy another house in the fall when replacing her was difficult. Left a bad taste in our mouths.

    Also, did one land contract where lawyer assured us that if the person walked away or defaulted there would be no legal steps to take recover possession again. Simple. The person got to take insurance and taxes off as if he owned the house. First, he stopped paying insurance. That puts your mortgage company in a panick. (Not many mortgage holders will allow land contracts to be done/recorded) After he left and the house was to be sold, the closing attorney had a fit to have him personally appear to sign a "Quit Claim" with regard to the deed transfer. Can you imagine dragging a land contract failure to your purchaser's lawyer to sign anything? What a nightmore. And, not every buyer will accept quit claims in the chain of title.

    Make sure you check with some lawyer that's better than the one's we used to do these type transactions.

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  • Tom McGiveron
    Residential Real Estate Agent · Moriches, NY · Member since 2008 · 635 posts · 9 votes
    19y

    the key to a lease option is to make the consideration...considerable.

    dal, a thousand bucks is not enough....if you're selling the house for 100k, i'd say 2500 MINIMUM consideration would be okay. that's 2.5% of the purchase price.

    you're person basically gave you a security deposit. no good.

    i've never been involved in a lease option transaction, but i know this much:

    the transaction must be "recorded" - i guess that means at the county offices and/or definitely notarized.

    a deed is drawn up that states the sale of the property will take place on X and is contingent on blah blah blah [the buyer fulfilling the lease requirements].

    if they don't, they lose their consideration (money down). as a seller, never accept any kind of promissory note, unless it is backed by real property. get the cash and make it substantial. if a tenant/buyer can't afford it, too bad! get another tenant/buyer. who wants a tenant/buyer who can't come up with money down.

    with my limited knowledge of Lease Options, i also know that if you (as seller) have a mortgage on the property - this is a contract for sale - thus any Lease option would violate your DOSC, and vise versa, i wouldn't enter into any L/o with a seller who has a mortgage on the property, unless he could prove to me it will not violate his mortgage agreements.

    also, you record the L/o because it protects both you the seller and the buyer.

    a portion of the rent goes toward the purchase of the property and the consideration acts as down payment, or the buyer may request that the consideration be given back to him at closing.

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  • Ryan Webber
    Wholesaler · Amarillo, TX · Member since 2008 · 1k+ posts · 659 votes
    19y

    Always make sure to consult with a competent attorney before doing some of these creative investment startegies.

    In Texas, laws around lease options and contract for deeds (land contracts) have changed drastically in the last couple years. A seller becomes extremely liable (upto $250 per day from the day of closing) if stringent rules are not followed precisely. There is case law in Texas of seller's losing their entire equity on a house that was paid off.

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