Rent to own Questions

3 Replies

Hello BP, is it possible to do a lease option to buy on a single family home when you still hold a mortgage on the property? thanks

If you hold a traditional mortgage - FHA or conventional - yes you can but do 12 months at a time. Tell the tenant buyer you will extend it if they need more time.

Get 3% down.  

Sell at current appraisal. Get a new appraisal or a CMA from agent.

Get 1st and last rent.  Charge market rent.

Use a servicer like www.notecollection.com.  

Get the tenant to a FICO coach like www.UpgradeMyCredit.com , worth the money.

Tips to prevent a lease option from being a sale, these are IRS tips:

1. The rent should be at or near fair rental value. Breece Veneer & Panel Co., 232 F .2d 319. Get a written opinion of the rental value from a qualified real estate professional.

2. Keep rent credits toward the option price to a minimum. Generally, 20% or less is considered reasonable.

3. The option price should be at or near fair market value. Get a written opinion of the market value from a qualified real estate professional. Breece Veneer & Panel Co., Ibid.

4. Try not to tie-in substantial lessee improvements with the option exercise.

5. Do not pass legal (or equitable) title to the optionee\lessee\buyer.

6. Demonstrate that you intend to do a lease-option and that you believe the rent and option price to be reasonable. See Benton, 197 F.2d, 745; Lester, 32 TC, 711. Use arm's length lease-option documents along with the counsel of qualified professionals.

@Bill Gulley has an option to buy course on his site.

Promotion
Sharestates
America's Private Lender
Receive Fix and Flip Funding Approval In As Little As 24 Hours!
Sharestates helps developers and brokers secure funding quickly with the most competitive terms.
Get Funded

Forget #s 2, 4, 5 and 6 above!

Forget "lease-purchase" contracts, you don't need them and they will lead to problems in future financing and ultimately violations of law with tenant-buyers. :)