Crazy New Twist On Lease Options!
Well lease options are good for the land lord in many ways. But what about the renter? Often times the renter is given false hope.
But here is my crazy idea.
As a LLC a contract is written with a one year owner ship. Meaning:
The "renter" takes out an loan from the owner, and pays interest only loan.
At the end of the year the LLC "buys" back the property and then can reinstate for another year and readjust the price.
After 2 years or so the "renter" can perm buy.
renter takes care of everything, taxes insurance, and in return gets tax breaks and credit boosting.
Is this possible?
Should it be done, or I'm I crazy?? :-D
[addsig]
I may not be understanding you, but are you actually going to record the deed back and forth, and pay closing costs every year?!
Moj,
I love to see the creative mind at work. I have a couple of questions, please help me understand.
What's the benefit, why not just sell and carry the financing as interest only for a couple of years until they refi and you cash out?
Can't you already reflect a higher sales price due to their situation and your risk for carrying financing for a couple years?
Thanks for clarifying.
Why reinvent the wheel? Besides the extra fees involved keeping all those LLCs up and running, there is the added problem of confusing the tenant/buyer. A T/B understands a L/O, they lease the property, and can buy it when their credit improves. It's simple. Heck, I barely understood what you were trying to say with the LLC thing.
Now, let's respond to this "false hope" of the renters. In a nutshell, if the tenant/buyer is given any false hope, the blame for that rests squarely on the shoulders of the investor/seller. I send all of my potential T/Bs thru my mortgage broker BEFORE they sign up for the L/O. That way we all know what their credit is before they get in, and what they need to do in order for them to get the property refinanced within the time frame that you have laid out. They know exactly where they stand before they put up any money in the deal.
Roger
Whats the closing costs if the LLC has it's own RE agent? Taxes? My idea is to have multiple investors carry the burden of equity gain or loss, while the LLC gets rent
.
Meanwhile "renters" love the tax breaks, and pride of ownership means no landlord work.
The wheell could be better, I mean spinners came out not too long ago
Closing costs each time would include Deed and mortgage recording fees.
I really think it would be a paperwork nightmare going back and forth. You're CPA will want to strangle you. You will have to prorate taxes / insurance back and forth, as well as depreciation.
I don't mean to rain on your parade, but I think you are making it difficult on yourself.
Hey, even those fancy spinners, with all the bells and whistles, are still just wheels. They just have a lot more junk on them to get messed up, not to mention the price tag.
You're right. Your idea and spinners are similiar.
Roger
Mojo, Riding On Spinners and Dubbs!
Try it and let us know how you turn out! I think you should sell now and just hold a seller 2nd note for the tenant. You still would receive some tax benefits as well as pick up a lump sum of cash now.
[addsig]