What Are The Downsides Of Lease Optioning?
I have a potential deal but would like to know all the things to lookout for that could kill the deal or my profit.
If anyone who has had, or knows of someone who has had a bad experience with l/o deals could reply,i would appreicate it.
I was told friends don't let friends lease option.
Is that true?
Verbatim
[B]Lease Options pitfalls <P>
If lease optioning from a distressed buyer, they may accept your lease payment and NOT pay the bank.
Best to pay the payment directly to the bank using a cashiers check with the correct name on it.
Lease option can be a lucrative tool. Study, Study, Study.
No guts, no glory.
You may want to use a land trust to add to the privacy of what you're doing. (Making money, right?!)[ Edited by bigideas on Date 01/15/2004 ]
My personal opinion is that lease options and land contracts are bad aqusition strategies. I'll run through a story of mine...
I find a homeowner in distress from a divorce and purchased a 2nd property with a new husband. Old property was filled with junk and was in fixup condition.
I offered the homeowner a land contract which balooned in 1 year. She was delighted and off we went. However, the seller was still in the picture and because I didn't have the deed we had dealings with mortgagees, and this and that. We had no formal closing so it was hard ot determine the exact price that was owed.
I could go on in more detail but it was a mess.
My recomendation....purchase the property subject to the existing mortgages. Use a loan servicing company for security to the seller or if you would like a payment record to give to a bank.
Using this technique you get the deed. The downside is the whole option thing. With an option you do not HAVE to buy. If you can get a good deal, I would have to wonder why you wouldn't want to buy.
A popular technique is to purchase a property sub2 and then L/O or contract for deed as the exit strategy.
GOOD LUCK