I am currently flipping and selling my properties outright, but I'm wanting to build some monthly income and avoid short term capital gains tax. I am interested in selling my flips via lease option. Should I treat these properties like I would a standard flip or should I use more durable, yet less attractive finishes for the property since there's no guarantee the tenant will buy? I want my property to appraise as high as possible, so I'm curious to know how others are handling this?
@Austin Works I would continue to use top quality finishes. It will attract better tenant/buyers who are more likely to close, and less likely to cause damage.
I don't do rehabs myself but I focus almost exclusively on doing lease options with nicer homes for exactly this reason. Most of the poor reputation LOs have is probably because a lot of landlords do them on their crappy properties that they can't attract good tenants for, imagining that somehow an option is a magic bullet to make the tenant a better one. Or they know full well low quality tenants typically don't buy so they're just scamming them out of their option money.
listen to your market and comps- make sure your lease option meets the state laws!
I like Mortgage Wraps more than lease options.
@Danny Webber , by mortgage wrap, are you referring to me financing the property to the tenant-buyer, on top of my own mortgage with my bank? What do you require down from your tenant-buyer when doing this?