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Forums » Rent to Own a.k.a. Lease Purchase, Lease Options » Terms for Lease Option with original owner

Terms for Lease Option with original owner Subscribe to Terms for Lease Option with original owner

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Anthony B.

Real Estate Investor · San Diego, California


Forum_avatar_avatar-fernicus

Icon_minipost Sep 19 '07, 11:27 AM

Example:
Found a home owner willing to do lease option. You find a rent to own buyer. You sandwich the deal in a 2 year L/O. 1 Year down the road the buyer bails out of L/O contract. What are the terms/penalties you have in the original home owner's L/O contract, and what are the terms/penalties for the L/O between you and the Rent2Own buyer??

Me starting out, I cannot afford to pay the original home owner the rent in the agreed upon L/O.

P.S. No, I haven't done this yet, but I've started to find sellers and I don't want to screw myself.

Thank you in advance

Edited: 06/26/2010 at 04:00AM


Jon Holdman

Real Estate Investor · Denver, Colorado


Forum_avatar_avatar-wheatie
ModeratorPro

Icon_minipost Sep 19 '07, 07:06 PM

The agreement between you and the seller is just between you and the seller. Whatever the end buyer does doesn't affect the first agreement. If you can't make you rent payment to the seller, you'll be evicted. The option agreement may say that eviction terminates the option. In that case, you'll lose whatever option money you paid, and you'll be responsible for any expenses covered by the lease. Rent until its re-rented, for example.

Situation is the same between you and your LO buyer. They would probably owe you rent until you re-rent it (good luck getting anything beyond your security deposit) and would forfeit their option money.

All the specifics would need to be in the lease and in the option documents.

Really, its no different than if you purchased a house, got a mortgage and then rented out. The fact your tenant moved out wouldn't relieve you of making the mortgage payments. You need to have enough cash reserves to cover vacancies.

Jon

Edited: 06/26/2010 at 04:00AM

Small_flying-phoenixJon Holdman, Flying Phoenix LLC


Lanny Harris

Accountant · Atlanta, GA


Forum_avatar_avatar-financeguy1

Icon_minipost Sep 19 '07, 09:40 PM

Usually you would require a non-refundable down payment from the tenant buyer that would be in the 4k and upwards range depending on the price of the house. The sizable down payment screens out the ones who would bail on you and gives the tenant buyer a vested interest in taking care of the property. In the event they do bail on you you have the down payment to cover costs(rent) until you can find another tenant-buyer.

Edited: 06/26/2010 at 04:00AM


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