Lease Option Questions

3 Replies

We have an opportunity to help someone and at the same time make some money for us. They are buyers that have good credit, and he is a disabled vet, but they cannot qualify for a standard loan due to some lapse in payments while waiting on the military to pay them. Wells Fargo told them they would not be able to qualify for three years. They do have a down payment available. They were looking for a home with owner financing, but of course those can be few and far between. I spoke with them and let them know we could help them by purchasing the house, and owner financing it to them. I told them we would both sell it to them for more than we buy it for (5-10K), and also collect more in the interest on monthly payments than our payment would be.

After talking it over more with my husband we decided lease optioning would be the safer route for us to go, so that if they default we are evicting vs foreclosing. We are new to this and I know many investors like to purchase lease options, so I'm wondering about being on the other side of it. Would the down payment (20%) be a ridiculous "option fee" to collect up front? It seems like maybe $100 a month of the rent is standard to be applied to the principal, and just based on rough calculations it looks like with financing the first few years like 160 would be going to principal for us. 

Who pays taxes? I presume it's us because it would still be in our name. What about insurance? 

Any other thoughts on this? 

@Jocelyn Hinz   How are you purchasing the house?  Cash?  I would try to find a seller that's interested in a lease purchase and assign that contract to them.  No risk to you.  

You would pay taxes and fire insurance if you owned the house.  

Be careful.  Lots of moving parts and you could find yourself in trouble. 

Oh. And watch out for those "rent credits" towards principal!

Like was noted above, lease-option assignments are the cleanest ways to lease with an option and then assign the deal for a 3% fee

Use a RMLO to qualify the buyer to protect the seller and you the real estate investor

See @terry 

@Terry Lewis  undefined for RMLO

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