OK Ive got a question. Ive decided that a lease option seems to be a really good way to promote monthly cash flow. Of course this all goes to say of course that the terms have been negotiated in your favor. My question. Say you do find such a deal and decide to sublet, how are the new renters affected, what are the legal relationship between me and said renters. If Im only leasing and therefore do not own the property yet, what are my liabilities.Perhaps someone who has more experience can give me more personal take on this issue. I know it can work, I just have not worked out all the fine points, and dont fully understand the ramifications of subletting for a profit.Another point - For example in this case would it make more sense to say lease option to buy or just straight lease especially if Im really just out to make a nice cash flow, say in this NYC Market maybeee a $100 - $350 profit on a 2 family house.Isiszion
I have not done any lease purchase deals, but here is what I know in a nutshell. Hopefully others can provide more information.Most lease purchase deals favor the buyer. It's a good way to control a property for little money down. If it goes up in value, you have captured that gain with less risk. The best deals are where you lease purchase a property for a few years and then sell at a nice profit without ever having to actually purchase the property.It's hard to find these deals, but they work great when you do. The specifics vary from deal to deal and are up to the individuals.One thing about subletting is there is work involved in renting a property. There is no way I would go to the trouble without the hope of appreciation, the benefit of someone else paying down my mortage and the great tax benefits. But it may be worth it to others for $100 - $350 a month. Just make sure the risk of negative cash flow is low.Mark
IsisZion used the term "lease-option". In your reply you used the term "lease-purchase". Don't mean to split hairs but the difference is worth noting. In a lease-option - There is an obligation to meet lease commitments and an option or "choice" to purchase the property , usually on a date certain. A lease-purchase generally obligates both the lease AND the purchase of the property, i.e. it is not an option to purchase but rather a contractual obligation ....So, as an investor - I prefer to use a lease-option going into a property - negotiating as long a lease as possible at as low a rate as possible, with a fixed purchase price that allows me to buy or walk.I've used a lease-purchase as an exit strategy - bumping the tenants rent UP(so they can prove they are capable of meeting future mortgage obligations), applying a small amount per month towards the future down payment - and selling the property(1 year later in my case) as per the contract.My two cents, 11
Isiszion:OK Ive got a question. Ive decided that a lease option seems to be a really good way to promote monthly cash flow. Of course this all goes to say of course that the terms have been negotiated in your favor. My question. Say you do find such a deal and decide to sublet, how are the new renters affected, what are the legal relationship between me and said renters. If Im only leasing and therefore do not own the property yet, what are my liabilities.An experienced lease option seller won't let you do that. I would never let you do that.WRT what is your status, I would say that it varies from state to state according to the law. As lessee who is subletting, probably most of the responsibility devolves on the property owner. However, said property owner might sue you into bankruptcy if you did something that caused him harm.
b06mjb:Most lease purchase deals favor the buyer.Again, not if you are dealing with an experienced lease option seller. Generally, as a seller, you are going to collect a fat option fee up front, with a firm date for option expiration. You will also get to set a purchase price on the house that is higher than would be normal - if the buyer had the means and the credit, he would be buying in the conventional market. It's a good way to control a property for little money down. If it goes up in value, you have captured that gain with less risk. It is indeed a good way for the buyer to control the property for relatively little money down. However, that money is an option fee which will not be refundable and may be only partly applied to the purchase. The experienced lease/option seller will write an escalator clause into the agreement to ensure that he captures at least a big chunk of the appreciation.The best deals are where you lease purchase a property for a few years and then sell at a nice profit without ever having to actually purchase the propertyIt is possible to arrange such a deal, if the seller is a sucker.
Well well well I did not mean to start any chaos fellow fools. I should inform you that the reason I initially asked this question was because in our Daily News here in NY, I kept seeing soooo manyyy and I quote "rent/with an option to buy" heading in the properties for sale section. So I figured I'd look into it. Well of the last 6 I called on it was actually either the Broker listing this, in which case what I got from said brokers was basically the following - rent now for a set period at which point you must buy the property. Of the two that were private sellers. One lady wanted me to rent her two family for 875/month for three months at which point I would have to come up with the rest of the 6000 downpayment and actually close on the property. Ehhhh not for me so Im still scoping out such deals. Im convinced they must exist, I mean as Allen says in Nothing Down for the 90's. A real dont wanter will almost always settle for your terms. Im hoping he's right.Im also finding that Brokers seem to deal with me more upfront when I tell them straight up that Im looking for income generating properties that I can assume with little or nothing down.(Not all now mind you..some guy actually lauged at me this morning on the phone..."A two family for $130, heheeee is this a joke) Man its rough when youre just a small fry starting out..lol. I try not to let it get to me though, but its hard. :)By the way any techniques that you guys actually use when dealing with traditional brokers.Isiszion
By the way any techniques that you guys actually use when dealing with traditional brokers.When looking for no money down, or buyer-tilted lease-purchase deals, you almost always have to deal with For Sale By Owners (FSBOs). The main reason for this is the broker wants his money upfront, so some money must be present in the deal to pay the broker.Often, the Buyer will need to educate the "don't wanter" seller as to the creative ways he can be rid of the property. If the seller is an unhappy landlord who has not been able to sell, they may very well give you favorable lease/purchase terms. If you're lucky, the seller may own it free and clear, or would be willing/able for you to take over payments on his mortgage. In all these cases, you are better off skipping the broker-represented seller.The one exception is if you are able to obtain financing and the house is selling 10-20% below market value. In these cases, loan programs exist where the seller and broker can get their cut and you can get in with nothing down. I will post about some of these situations I have run across later.
>>>>I will post about some of these situations I have run across later.<<<< Ummm my Im all ears. Awaiting your next response.Isiszion
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |