Lease Options

3 Replies

Originally posted by @Lindsey Simpson :
When speaking speaking to a potential seller about a Lease with option to buy, do I have to disclose that I intend to rent it out?

Lindsay, I don't know how you're speaking to a potential seller about a lease with option to buy but are you 

1. trying to solve the sellers problem to sell the house (lease option assignment) or 

2. are you trying to show them that you are going to do a sandwich where you stay in the middle?

If you're trying to help them sell the house on lease option because they can't sell it for cash, is  your intention is to assign a deal for a fee, then I would tell them that, and use a letter of intent.

I show the seller basically three options, 

1. they can sell for cash and pay the cost to sell, which is about 10% of the value of the house, 

2. secondly they could rented out and wait for appreciation and there's knocking to be very much principal paydown, and 

3. lastly they can offer the property for lease to own, somebody moves in and pays their market rent for period of time, works on their credit rating and their ability to borrow money, and then pays full price and also pays closing costs.

If you're doing sandwiches I would be very cautious about doing them if you are very tight with money as many people on BP are

A good rule of thumb with sandwiches, is reserves of 3 to 6 months expenses PITI

Remember you're basically guaranteeing to the seller on the sandwich that if the tenant buyer doesn't pay you, you are still legally obligated to pay the seller.  You may pay 2-3 months expenses with eviction and clean up and re marketing.