L/O - and can't find tenant?
I'm starting to look at L/O deals, and am making calls now.
One point:
Anyone sign up a L/O, but then not be able to put a tenant
in it - for lack of interest? What then?
From reading the Bronchick course, and Marcos (RD site) - everything I could find - my guess is that:
(1) This should not happen if you lease it right - at a low
enough price
(2) If it is hard to move - you could always drop your price
down to what you were paying per month.
(3) Seems I read somewhere that some people put an addendum on their agreement, basically saying that if they
can put a tenant in the property in 2 months or so, they can cancel the lease with the seller.
Just wanted to see what experience others here have had, so I can learn in advance. Great forum. Marcos posts here, and others also, go me going in this.
Thanks in advance,
mattc670
>>(1) This should not happen if you lease it right - at a low
enough price
Matt, finding a tentant buyer is usually the least of your worries. Concentrate on trying to find a motivated seller with favorable terms.
>>(2) If it is hard to move - you could always drop your price
down to what you were paying per month.
If you use the right wording in your contract with the seller, you have the right to assign the entire contract. So for a fee, for example $2500, you could assign the contract and the terms you have with the seller to anyone you want. Be careful to screen this person well though, because if they don't live up to the contract, you will have a very unhappy seller.
>>(3) Seems I read somewhere that some people put an addendum on their agreement, basically saying that if they
can put a tenant in the property in 2 months or so, they can cancel the lease with the seller.
This is called your cancellation clause. 30 days is a good cancellation period, you'll know within 30 days if you'll be able to easily move this property. You can also limit your liability to one months rent in the case that you have to cancel out of the contract later, just make sure this is put in writing. If you need some help with your contracts, let me know.
man,
Thanks for the response.
I have the Bronchick course and contracts, but I don't think there is a cancellation clause in there...I could be
mistaken though.
Wondering if I could just add an addendum to my existing contract - with this clause?
I like your idea of limiting your exposure to one month's rent if it doesn't work out.
Sure - if you have any text showing something like this that I could use, I would appreciate you posting it here, or you can email me at mattc670@yahoo.com.
Have you had this situation arise, where you just couldn't get a tenant in one of your L/O's?
Thanks for the help,
mattc670
On 2003-05-19 15:05, man wrote:
This is called your cancellation clause. 30 days is a good cancellation period, you'll know within 30 days if you'll be able to easily move this property. You can also limit your liability to one months rent in the case that you have to cancel out of the contract later, just make sure this is put in writing. If you need some help with your contracts, let me know.
[/quote]
matt670,
you could also start you lease in 2-3 month (usually on higher end properties) to allow your self ampell time to market...
[addsig]
thanks Tony,
mattc670
Concerning thirty day escape clauses and the like:
If you're new to the game without cash reserves, make the best deal you can so there is profit in the deal.
Doing my first Lease-option I lined up an investor with "back up funds", so that if a payment came due, they would cover it.
The terms I gave the investor: If they had to put up money they'd get their money back Plus a twenty percent premium.
I also gave the investor 60% of the deal.
P.S. The investor never put a dime in. He made an extremely good profit. Guess what? Word spreads. I have the original investor (a dentist) and friends of the man anxious to do deals with me. (I rarely need investors anymore, but they are there if I need them.)
Don't be greedy, as Hyman Roth said in The Godfather (movie) "Hyman Roth always makes money for his partners."
Structure an investor deal so your partners always make money and the ability you develop for making deals will be limitless.
Negotiate like you haven't any money to tie up upfront.. (But ALWAYS have some in reserve. If you don't have any, now, line up partner, and always perform under your agreements, no matter what.)
Placing weasel clauses in agreements will make your deals NOT be accepted. Believe it. Simple, cut and dry deals get signed... and you make money.
You try to get tricky and people will smile at you and say "Let me think about it." (That's the kind way of saying "Get away from me you sneak, do you think the whole world is stupid?"
[ Edited by bigideas on Date 01/15/2004 ][ Edited by bigideas on Date 01/15/2004 ]
Here are a list of points to consider when doing lease options to reduce the time it takes to get a tenant/buyer:
1. Make sure that the house is in a good location, in a middle class neighboorhood.
2. Make sure that you charge close to market rent for the area.
3. Make sure that you advertise properly. ie. Classified ads, signs etc.
4. If you want a larger option deposit, don't make it a sticking point. Most people get turned off the initial payment, but can be worked out somehow.
Just my 2 cents.
joe