Rehab Lease Option

[Anill Judell]

Dear forum members,

I am new to the forum. Recently I trying to do a normal lease option in the Caribbean real estate market.

I have found a seller who has a property that is not completely finished. There will be an investment in cosmetics like: doors, sanitary, electrical wiring, gardening. I want to make an agreement that as a consideration fee I will finish the property.

I am planning to rent the house to tourist visiting the island
These are the details:
Asking price 324.000
Costs of repair 10.000
Monthly market rent (due to seller) 2.500
Market value after repairs 350.000
My montly income would be +/- 4.000
I will propose a lease option deal for 4 years

How would you guys as professionals look at this deal?

Some other questions:

If I understand correctly I will need 2 documents: lease and option agreement

Do I need an escrow account?

I know my seller has very good connections with the bank who financed the house. Is this a bigger risk for me you guys think? Regarding the Due on Sale?

How can I avoid being double crossed by the seller with the Due on Sale Clausule?

I hope to learn from the professionals! Maybe someday I will be one also.
Thanks in advance

Anill

[Brian Gibbons]

Hi Anill Judell

Thanks Brandon Turner for the heads up!

Wow the Caribbean!!

When I have done Lease Options in Australia and New Zealand, I went to a local RE solicitor with US contracts.

A delayed sale and purchase agreement and a lease with option along with a repair addendum is a good approach.

I will post a repair addendum here in the forms section.

See http://www.biggerpockets.com/files/user/REISkills/file/repair-addendum-to-tenants-purchase-option

So I assume you are going to lease with an option from the seller and sub lease for income?

That is a sandwich deal. I would get the longest lease possible, smallest option fee like $10, record your option to protect your interests, get a spread of rent to seller compared to rent to your tenant 25% or more, and lock in a sales price lower than ARV.

If you have questions, please feel free to contact me.

And invite me to the Caribbean! I will bring my swim trunks!