Lease/Options in Minnesota, my findings.

6 Replies

I belong to a REIA, and have been doing RE investing since 2000. I have worked with a metro attorney and his staff, to have his college law school interns pull Lease/ Options, Lease/ Purchase, Rent to Own,and Rent to Buy. All forms of the ways people have been writing these documents of a Lease with option to Purchase, that have been brought to court and argued in a number of ways, but all, in court as a "case". In all cases the Lease Options were over turned and declaired as an "installment contract", and were required to be treated as a C/D (Contract for Deed). Most rewritten as a c/d, and/or monies returned to the renter.

Minnesota is a Contract for Deed state and has been for a long time, finding farms back in the 20s-30s using them, and have very specific rules pertaining to contracts for the deed.

Now even "pre-paid legal" found at every REIA group, and used by thousands of investors, here in minnesota, perticularilly like the lease-option. Its just so heavily "pushed" at REIA meeting, and gurus, and bootcamps! But under their "advise" they would not sell on a lease-option, and you certainily cannot waive your landlord rights in this state, and have the Lease-Option buyer pay for repairs, and fixing up of the house, aka work for equity provisions.

If you Sell on a lease-Option, Lease-Purchase, or Rent to Own, in Minnesota, and are challenged in court, you will loose, based on all the hyped "pros" of lease-option gurus, REIAs, and other investors tell you about why to use them, AT LEAST IN MINNESOTA !

Its nothing more than an "Installment Contract", and we call them C/D's or contract for deeds.

We pulled over 273 cases! It was a real "eye opener" for me at least.

Very interesting to hear. Does anyone know how WI handles lease options?

I must be one of the lucky ones or I'm wearing a Teflon suit.  I've been investing in real estate for almost 22 years and have yet to face a situation like you describe, in any state, including MN where I have done deals.  If a deal presents itself in the Land of 10,000 Lakes, I would not hesitate to pursue it.

Its, just a risky way to do creative real estate here in Minnesota. Ive even done deals with Lease-Options when Ive first started and it was the best option to use when I was learning.

Contract for Deed laws are just very well established here, in our state.

What I found to be the best thing to do if you have a lease-option in our state is stay out of court,and be careful on the people you put in the home for that reason.

Its so weird to see the gurus come to our REIA selling and teaching Lease-options, and the PPLegal team write them, the club leader talk them up, but knowing how badly they are, when you find yourself in court in front of a judge.

Trying to help out a friend (motivated seller) with her house in Ironton, MN. She moved out of state.. paying rent plus her mortgage. Just wants out even if it means short saling. Does anyone know that market? Or point me in the right direction?

@Ruth Bayang

Have your friend write down what she wants to do on bigger pockets, 

if the house is vacant she can rent it or some kind of seller finance

What is existing financing, what is the loan balance, the payment and what kind of loan it is, FHA or whatever

Originally posted by @Brian Gibbons :

@Ruth Bayang

Have your friend write down what she wants to do on bigger pockets, 

if the house is vacant she can rent it or some kind of seller finance

What is existing financing, what is the loan balance, the payment and what kind of loan it is, FHA or whatever

House has been vacant since October 2014. She lives in WA now and making double payment... just wants out.

Had a renter who stayed 1.5 months and basically trashed the place so she's averse to renters.

Owes $52K, conventional mortgage with Wells Fargo, variable interest rate (currently 6.2%.

Payment is just under $500 (PITI)

So lease options are a no-no in MN? How is a contract for deed different?

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.