Can I assign a Lease Option - For Terms?

17 Replies

If I can negotiate the payment of full asking price in exchange for only 5%-10% down with the balance carried at 6% by the seller, can I assign the option for a fee? 

I would not really be providing a discounted property, but the terms are very nice. Is that something another investor would pay a few $1,000 for? Property is not listed.

Thanks

Jonathan

@Clay Smith  

The short answer is "yes", probably.

Is this on a free-and-clear property? Why are you offering so much down? And why are you offering interest?

If you find a willing and able seller who puts the property under contract to you, and a willing and able buyer who agrees to your terms, you can do just about anything....

Originally posted by @Karen Rittenhouse :

The short answer is "yes", probably.

Is this on a free-and-clear property? Why are you offering so much down? And why are you offering interest?

If you find a willing and able seller who puts the property under contract to you, and a willing and able buyer who agrees to your terms, you can do just about anything....

 I'm confused, I was able to get 10% down and the seller will carry the rest at 6%, Isnt that good? the property only cost me 10% of its value to acquire. 

Originally posted by @Jonathan Napper :
Originally posted by @Karen Rittenhouse:

The short answer is "yes", probably.

Is this on a free-and-clear property? Why are you offering so much down? And why are you offering interest?

If you find a willing and able seller who puts the property under contract to you, and a willing and able buyer who agrees to your terms, you can do just about anything....

 I'm confused, I was able to get 10% down and the seller will carry the rest at 6%, Isnt that good? the property only cost me 10% of its value to acquire. 

Not really understanding what you mean by terms, are you asking the seller to finance the option price? The answer is NO! Any financing agreement can not be assigned to another borrower without consent of the lender. If you mean terms as the option term and any lease agreement that you and a seller agree to, then yes, so long as the contract or your state law does not prohibit assignments. You can not assign your obligation to pay an obligation created by you to another party without the lender's consent. :)

Interesting. So if I negotiated a 1 year lease and a purchase option. ( or just a purchase option) , I cannot assign it? What if the seller knows I'm going to assign it and is okay with it? I've negotiated good terms, I can't assign that contract to someone else?

@Bill Gulley  

Jonathan:

Terms are flexible. Why offer 10%? Often the seller needs less or even nothing at all.

And interest is rarely necessary. They want their purchase price and, when you offer that, they're usually thrilled because they don't expect full price from the retail market.

Originally posted by @Karen Rittenhouse :

Jonathan:

Terms are flexible. Why offer 10%? Often the seller needs less or even nothing at all.

And interest is rarely necessary. They want their purchase price and, when you offer that, they're usually thrilled because they don't expect full price from the retail market.

How would you toss the offer to the seller for asking price with terms at 0% and nothing down? What kind of terms I guess is what I'm asking.

Oh, we usually give them something down, just don't make the assumption that they need 10%. It's easy to get stuck thinking like banks have trained us, and that's not necessarily the way it needs to be done.

For example, the seller may need $700 per month to cover costs once they move. If that's what they need, offer to pay them moving money (if they ask for it!) plus $700 per month.

Point is, be creative! Start by asking questions and do what you can to meet the needs of the seller. Going in, you have no idea what those needs are!

Originally posted by @Jonathan Napper :

Interesting. So if I negotiated a 1 year lease and a purchase option. ( or just a purchase option) , I cannot assign it? What if the seller knows I'm going to assign it and is okay with it? I've negotiated good terms, I can't assign that contract to someone else?

@Bill G. 

What? That is not what I said, I said you can't FINANCE terms and assign a financing agreement without consent of the lender/seller.

Saying "terms" implies all kinds of arrangements, including financing terms.

Yes, you should have a meeting of the minds with a seller of your intentions in all contracts. :)

Originally posted by @Karen Rittenhouse :

Oh, we usually give them something down, just don't make the assumption that they need 10%. It's easy to get stuck thinking like banks have trained us, and that's not necessarily the way it needs to be done.

For example, the seller may need $700 per month to cover costs once they move. If that's what they need, offer to pay them moving money (if they ask for it!) plus $700 per month.

Point is, be creative! Start by asking questions and do what you can to meet the needs of the seller. Going in, you have no idea what those needs are!

So would this be for a sub to deal? I'm still learnig, and I've listened to your podcast...twice :)

No @Amanda Young . This is not about taking over their loan. Here there is no mortgage, they own free and clear.

What exactly is the VALUE a investor will pay and assignment fee for? If I can negotiate great terms, is that something someone will pay for?

Thanks

Jonathan 

@Jonathan Napper  Yes, someone will definitely buy a great deal from you, whether the price is low (wholesale) or the terms are desirable.

But...right now you're too new. You're describing as "great terms" what are actually terrible terms. Only someone with zero experience (and probably not many brain cells either) would buy a contract from you for a 'deal' where they have to pay retail financing terms. i.e. Full price, 10% down, 6% interest. That's crappy terms even from a bank!

I'll give you an example of a pretty good (note I didn't say "great") terms deal. My very first deal was 0% down, purchase for mortgage balance (which was ~20% below market value), take over payments.

I know this is probably beyond anything you've even dreamed yet so I'll repeat: Yes, someone GAVE me their house for significantly less than it was worth and WALKED AWAY. No move out money, no down payment, no promise to give them anything in the future.

I made the payments for 18 months (with a tenant in there at $300/month positive cash flow) and then sold it for 25% more than the remaining mortgage balance.

Well, I get what your saying and those are very good terms but I am talking about Class A Commercial Assets, prime properties in prime areas. Whether its a storage complex, 16 unit Multi, 31 unit fully lease boat storage complex...etc.

Elephant hunting with a BB gun!

Does it ever dawn on people to learn real estate before trying to do deals involving real estate? Without knowing real estate basics you don't know if you have a deal or decent terms.

Find distress properties and you can find great deals. You can take an option and yes, you can assign the option.

There is no set formula of setting an option assignment fee, you need to understand valuations, what the value of your services are, what is customary, what the property is worth , the spread of the distressed situation and if the deal and property is marketable.

You can ask questions till the cows come home, you'll get comments, but until you understand real estate and valuations and contracts and financing, it will still be hard to put spotty comments into play in reality.

Start with residential properties. Good luck :)  

Deals dont ONLY come from motivated/distressed sellers.  My original post was trying to figure if one can assign a LO or Wholesale a property that is NOT distressed, but a good performing CLASS A property.

@Jonathan Napper   great question and thanks to all who have taken the time to answer and leave feedback.

My opinion is as follows:

Yes you can effectively "sell" your position in the lease option assuming your document allows you to do so, sub-lease, sub or sandwich option etc. Something you may want to consider is selling that property (contract) to a tenant buyer to get a premium instead of trying to sell a property that may not fit all "investors" parameters for debt, LTV, down payment etc.

Look at it this way, a tenant buyer that has bad credit or is unable to prove income right now will usually pay a premium for the ability to "buy" or "own" something. Car loans, mortgages, credit card interest rates.... it's all the same. The more provable the buyer the better rate and more options to finance. Look for a tenant buyer instead of an investor and you may find yourself able to make a few bucks and sell the contract or sandwich it to an end user a lot easier.

I hope this helps and best of luck to you!

Unlike cars and credit cards, payday lenders and furniture rent to own scams, real estate is regulated as to predatory dealing, so if you think you're going to jam someone with poor credit or means, better think again.

Yes, you can assign an option, that does not include any financing terms on any type of real estate.

In the forums, my comments are usually tempered to the perception of those I'm addressing, if their posts indicate a lack ok knowledge, I try to comment appropriately to guide them the best I can.

I also drill down deeper with respect to my comments without taking an hour of typing or writing a book to explain the background for a comment, just hit on the issue and I don't jump on the how to pull some strategy if it doesn't fit the deal or the level of knowledge of the OP.

Yes, you can sell an option on a class A multi. If it is a deal or you have a fool with money, otherwise the ability to do so will be based on getting a good deal. How do you know that?

Now, things do happen, you might bump into an investor who says he'd pay X dollars for that property in conversation, then you go get an option for much less, then go back to him with a smile on your face, but short of that, the assignment of the option is not an issue, the rest of what goes with that transaction is the issue. But, Good luck :) 

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