Wholesale Lease Option Paperwork

14 Replies

Hi, My name is Justin and I'm a newbie to REI but I am very eager to get started investing.

My background is in IT as a Systems admin and I've had my hand in a lot of other smaller business ventures. Now i am really trying to learn as much as possible about REI so i can put my best foot forward. I'm just about ready to take the next step, but i need some clarification.

I've been up and down forums, blog posts, videos and books and I am still unclear as to exactly what paperwork is needed for wholesaling lease options. 

I'm Located on Long Island, NY and want to get this all straight before i begin calling leads.

I guess my main questions are as follows...

1. Do i need a separate lease agreement and separate option to purchase, or should it just be one solid document?

2. Is the letter of intent something entirely different from the lease and option to purchase?Is it a necessary document?

3.is it possible for someone to list all of the documents thats are recommended when wholesaling lease options? 

Originally posted by @Justin Conza:

Hi, My name is Justin and I'm a newbie to REI but I am very eager to get started investing.

My background is in IT as a Systems admin and I've had my hand in a lot of other smaller business ventures. Now i am really trying to learn as much as possible about REI so i can put my best foot forward. I'm just about ready to take the next step, but i need some clarification.

I've been up and down forums, blog posts, videos and books and I am still unclear as to exactly what paperwork is needed for wholesaling lease options. 

I'm Located on Long Island, NY and want to get this all straight before i begin calling leads.

I guess my main questions are as follows...

1. Do i need a separate lease agreement and separate option to purchase, or should it just be one solid document?

Separate

2. Is the letter of intent something entirely different from the lease and option to purchase?Is it a necessary document?

It is a Meeting of the Minds and acts as Escrow Instructions

Seller Side

1. Letter of Intent

2. Option 

3. Lease

4. Memorandum of Agreement

5. Release Mortgage Info

6. Option Release Doc

7. Seller's Acknowledgement

Tenant Buyer Side

1. Earnest Money for Lease Option

2. Lease

3. Option

4. Option Release Doc

5. Tenant Buyer's Acknowledgement

@Josh Caldwell

This is perfect thanks so much Brian! 

Now i just need to find an investor friendly attorney/title company.

Originally posted by @Brian Gibbons :
Originally posted by @Justin Conza:

Hi, My name is Justin and I'm a newbie to REI but I am very eager to get started investing.

My background is in IT as a Systems admin and I've had my hand in a lot of other smaller business ventures. Now i am really trying to learn as much as possible about REI so i can put my best foot forward. I'm just about ready to take the next step, but i need some clarification.

I've been up and down forums, blog posts, videos and books and I am still unclear as to exactly what paperwork is needed for wholesaling lease options. 

I'm Located on Long Island, NY and want to get this all straight before i begin calling leads.

I guess my main questions are as follows...

1. Do i need a separate lease agreement and separate option to purchase, or should it just be one solid document?

Separate

2. Is the letter of intent something entirely different from the lease and option to purchase?Is it a necessary document?

It is a Meeting of the Minds and acts as Escrow Instructions

Seller Side

1. Letter of Intent

2. Option 

3. Lease

4. Memorandum of Agreement

5. Release Mortgage Info

6. Option Release Doc

7. Seller's Acknowledgement

Tenant Buyer Side

1. Earnest Money for Lease Option

2. Lease

3. Option

4. Option Release Doc

5. Tenant Buyer's Acknowledgement

@Josh Caldwell

Is there any need for using these documents?

Affidavit of Liens

Due on sale disclosure

Property disclosure/disclaimer

These are pulled from http://www.biggerpockets.com/renewsblog/2011/06/26...

Justin Conza I used the wholesaling lease options course by Joe McCall. It's $495 with a 30 day money back guarantee. You might find it useful. 1. Keep lease and option separate just in case you need to evict later on. Supposedly if you keep it as lease & option in one document, then you will need to foreclose instead of a simple eviction. I personally got a little scared of all the legalities surrounding a Lease Option Wholesale so I never went through with any deals but I WILL say that I got about 5 yes's in my first couple weeks of looking for leads just by using Zillow FSBO to cold call. Lease Options is a GREAT way to make quick cash if you have the guts. Good luck!
Originally posted by @Brian Gibbons :
Originally posted by @Justin Conza:

Hi, My name is Justin and I'm a newbie to REI but I am very eager to get started investing.

My background is in IT as a Systems admin and I've had my hand in a lot of other smaller business ventures. Now i am really trying to learn as much as possible about REI so i can put my best foot forward. I'm just about ready to take the next step, but i need some clarification.

I've been up and down forums, blog posts, videos and books and I am still unclear as to exactly what paperwork is needed for wholesaling lease options. 

I'm Located on Long Island, NY and want to get this all straight before i begin calling leads.

I guess my main questions are as follows...

1. Do i need a separate lease agreement and separate option to purchase, or should it just be one solid document?

Separate

2. Is the letter of intent something entirely different from the lease and option to purchase?Is it a necessary document?

It is a Meeting of the Minds and acts as Escrow Instructions

Seller Side

1. Letter of Intent

2. Option 

3. Lease

4. Memorandum of Agreement

5. Release Mortgage Info

6. Option Release Doc

7. Seller's Acknowledgement

Tenant Buyer Side

1. Earnest Money for Lease Option

2. Lease

3. Option

4. Option Release Doc

5. Tenant Buyer's Acknowledgement

@Josh Caldwell

 hey brian can you explain what numbers 1 & 6 in the seller side list are for

thanks

@Justin Conza

1. Letter of intent to lease and or purchase.

6. I use an option release - record the option and seller signs an option release for a fee - similar to an assignment but different.

@Josh Caldwell  

@Josh Caldwell of Pittsburg PA REIA does the same. Works better than entering into a LO w Seller and assigning the deal to a buyer.

Also realize that if the TBer has an ASSIGNED LEASE and an ASSIGNED OPTION, with you as a middle man, it will be hard for the TBer to get a mortgage.

It is much better to have a clean lease and separate option between the seller and the new tenant buyer to have no problems getting the mortgage.

1. Enter into a LO w seller , sign a letter of intent to lease and option, and you will sell your option.

2. Have TBer sign an option release and new lease and option with the seller.

3. Have the Seller sign the new lease and new option and option release.

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That said, if you do a Sandwich Lease Option, you can do a Reverse Assignment of your option, sell your option to the seller and create a new lease and new option between the seller and the resident TBer.

For ex) $100K appraisal, 

You the REI do a lease option w seller.

Then do the sub lease and sub option.

``

When it is time to exercise, 

  • Take your profit (Say $10K) in a note and record it.
  • Create new Buyout agreement of your interest
  • Create new lease and new option with Seller and TBer.
  • You get paid when the house closes escrow.
  • No double escrow and no transactional funding.

@Brian Gibbons

I know this an old thread but I'm a new investor and I been researching lease options and how to do them. Can you please clarify the (seller)side  #7 the seller's acknowledgment. Is this the part where they acknowledge that there may be a due on sale clause that can be initiated? Also the tenant buyers side acknowledgement (#5). Btw I just saw your video on YouTube regarding paper work training 30 min lease option assignment and it cleared up a lot for me. Thank you 

@Brian Gibbons

Thank you for the link. I think I understand the process of the lease options, and just watched your video on option release. To my understanding Lease options are tricky in Texas but can be done. I read up on John Jackson and how he does the lease options in Texas. Forgive me for asking again but on your answers above regarding the documents needed to perform the Lease options, what is ..... (bolded) I understand everything else but the last documents in your answer post.

Seller Side

1. Letter of Intent

2. Option

3. Lease

4. Memorandum of Agreement

5. Release Mortgage Info

6. Option Release Doc

7. Seller's Acknowledgement

Tenant Buyer Side

1. Earnest Money for Lease Option

2. Lease

3. Option

4. Option Release Doc

5. Tenant Buyer's Acknowledgement

Thank you for your insight

@Paolo 

I advise you to read 

http://www.lonestarlandlaw.com/Executory.html

...What exactly is an executory contract?

Executory contracts include any transaction that defers material action by either party that pertains to ownership or possession of real property into the future. Think of it this way: an executed contract is one that is fully performed at closing. It is done, finished. An executory contract, on the other hand, leaves something dangling—usually the most important item of all, the delivery of a deed. The classic executory contract is the contract for deed (or land sales contact), which provides that the buyer gets title after making payments over a period of years. All such devices now fall under the extensive rules and penalty provisions of Property Code sections 5.061 et seq.

Contracts for deed, lease-purchases, and lease-options for longer than 180 days are unambiguously defined as executory contracts. Look closely at section 5.062(a)(2): “An option to purchase real property that includes or is combined or executed concurrently with a residential lease agreement, together with the lease, is considered an executory contract for conveyance of real property.”The “180 days or less” exemption exists as an accommodation to real estate brokers, because otherwise the TREC 1-4 contract could violate this provision when combined with a TREC temporary lease....

TX statute

http://www.statutes.legis.state.tx.us/Docs/PR/htm/...

@Paolo B. undefined

@Brian Gibbons

Thank you Mr. Gibbons I truly appreciate you in taking the time to answer. I do understand a little better, I will take the caution by getting some help with a real estate attorney who is also an investor ( who I met at a meetup event) once I get them to sign the letter of intent ( thank you for your videos on them) I will have them go with me to the lawyer office. I'm about to start my first direct mail campaign by the end of the month. I just wanted to be able to offer a lease option if they don't want a cash offer. But I have to watch more of your videos on sub 2 also so I can offer that. Thank you for all those hours of content on YouTube , it really helps beginners.

@Paolo B.

look at "contract for deed assignment" in texas or 

 Using w private lender cash purchase and selling on a wrap with an RMLO underwriting the wrap buyer

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