Why Would They Choose A L/O?
I've got a couple of questions. First, I understand why someone with little equity in a home would find a L/O attractive but what about someone that does have a lot of equity? Say if they sold conventially after paying closing cost and all realtor fees and crap they still come out with like a couple of grand in hand, would this person just not be a very good candidate for L/O?
Second, if they do have equity in the home and don't agree to the lease portion, could you simply offer an option agreement to sell their home and give them some money when you close on the house? I'm not sure if that makes sense but if you understand what I mean please comment.
Third, if I understand correctly when you do a L/O you sign a lease with the seller for say two years with an option to buy then sublease to someone else, correct? If that is the case what happens if the people you put in the house decide not to buy when your agreement with the seller runs out? Do you just redo the contract or are you under obligation to purchase the home?
Hope that's not too many questions!
Thanks,
Mitchell
would this person just not be a very good candidate for L/O?
*The seller may be interested in a L/O even if he has a lot of equity becuase at least he will have some cashflow instead of a house sitting empty. L/O work particularly well with seller who have had there house on the market for months and months and are tired of double house payments.
Second, if they do have equity in the home and don't agree to the lease portion, could you simply offer an option agreement to sell their home and give them some money when you close on the house?
*Yes, you certainly may. This is simply called and Option to Purchase
Third, if I understand correctly when you do a L/O you sign a lease with the seller for say two years with an option to buy then sublease to someone else, correct? If that is the case what happens if the people you put in the house decide not to buy when your agreement with the seller runs out? Do you just redo the contract or are you under obligation to purchase the home?
*You are not under any obligation to purchase the home, nor are the people you assign the contract to. It is simply an option you may or may not exercise. HOWEVER, you usually purchase this option with a certain amount of money. If you do not exercise the option, your money is forfeited to the seller. Needless to say, it is highly advisable to have the person you assign the option to make at least, if not greater, option money payment.
I hope that answers your questions. Good Luck!
I am just learning this stuff as well.... Also make sure you go longer terms with the seller. like 4-6 years.. than get a T/B for 2 yr. lease. if they dont exercise there option to buy than you find another T/B and cont. to make more money... and if they dont buy and it is close to your term with the seller, sell it in the paper or buy the darn thing... it has been appreciating for 6 yrs. but you agreed on a certain price at the beginning.. sorry if this is all confusing, i am still new to this but trying to explain what i have found out.. so i will learn more... lates.....