Lease Option Explaination??

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When doing a lease option - How does the final sale work???

Ok, say I have control of a property with the seller via lease option and I lease option it to another party, netting $200 in cash flow and $15,000 profit in the final sales price...

When it comes time to exercise the option to buy, how does it work?? Does the seller deed me the property and then I deed over the property to the final buyer? Or does the deed just go from the seller to the final buyer?? I know my attorney would do this, but just trying to get a feel for the logistics...

Also, is this transaction considered 1031 exchageable??? Can I take this profit in the end and put it towards another property tax-free??

Thank you!


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Comments(4)

  • jcattin28th April, 2004

    Matty,

    Well the way the deed is transferred by a titile company, its called a double closing, the buyer puts the cash in escrow, the title company cuts a check to the seller and deed the property to you, then they cut you a check and you deed the property to your buyer. So legally speaking you will own the proeprty for about 5 minutes.

    From ewverything that I have read, the answer to your second question is no you cannot do a 1031 exchange. You might be able to put the profits from the sale into another property. As to your last question I dont know about the tax free legality, I am not a CPA I am just a 17 year old senior in high school.

    I hope this helps,
    Jorgan Cattin

  • RVATX22nd May, 2004

    There is not deeding involved at closing. You ahve the power to assign your option to the end buyer. Consequently, you'll collect your assignment fee and one closing. Clean process.

    1031 is out- You must own the property and sell in order to use this strategy.
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  • e4rr2322nd May, 2004

    Hey well I am just being nosey and so I have a question? How does the paperwork, work on that L/O? What did you give the seller in exchange for rights on that property?

    Also a newbie......I hope you can help me out, because there have been a few perspective properties but I dont know how the legalities go? Where does the paperwork take place? All the books I have read show you have to make the deals, but what, where, how to you go about the paperwork?????????????

  • Homeshark30th May, 2004

    But if you just assign your option then you wouldn't be able to collect the bigger check by selling it at a higher price at the end of the option to your end buyer. You would only get your option assignment fee. Am I right? [ Edited by Homeshark on Date 05/30/2004 ]

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