Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
Ok I am a full time wholesaler, Seller wants OUT! tenants are not paying since Feb 1st. Owner wants me to take care of the problem :) .. Anyways how do I handle this? tenants want 15k to move out, owner said that he won't give them no more than 5k to reimburse them for the doors, and AC unit they put in. Owner also said he will give them an option to not go legal and evict them or if he has to go legal and evict them then they won't end up with nothing. Owner also recognizes this isn't his business and wants me to handle it which is fine, so the best option for me would be if the tenants don't cooperate, than to call up an eviction attorney start the process etc..
Real Estate Investor · Salt Lake City, UT · Member since 2010 · 2 posts · 3 votes
13y
Just an FYI: Here's the things the Judge/Court Advised me not to do. BTW, it is the Law in AZ and enforced in other states as Case Precedent.
1. You CANNOT pre-determine a future purchase price or discounted buy out.
2. You CANNOT collect more than 1.5x more than the monthly rent upfront.
3. You CANNOT credit any part of the deposit or rent toward a future purchase.
4. You CANNOT require the Tenant to do ANY maintenance
5. Two Documents (Lease & Option) doesn't matter as long as the Leasee has the Option, it is considered a "Sale", period.
These five things classify the transaction as a "Delayed or Disquised Sale" and gives an Equitable Claim of Interest IN THE PROPERTY to the Tenant which makes them "an Owner" and you can't evict an owner, you must foreclose.
What I learned is, the reason most Tenant / Buyers are successfully evicted is, they don't know their rights "as an owner" and just leave believing they have to. If they appear in court and Claim Equity, the eviction Judge CANNOT hear their case. You must go through with a full foreclosure action instead. Sucks Huh?
Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
13y
Yes I am involved, I dropped a note off yesterday saying that to call me to the tenants they called me and explained how the owner didn't do this and that, and then the owner has documents on everything etc. So pretty much the middle man. I figure the best way is to try to work with the tenants but they want too much money and the owner isn't will to give them that much, so maybe take this to an eviction attorney would be my next option. Owner has all documents and appears more responsible than the tenants
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
How did you structure this? Did you assign a lease option contract? Did you get a lease option with the seller, then wrote a different one with the tenant/buyer?
I don't do L/O's and am curious how you prevent this.
This was an obvious fixer upper, and you said the tenants compalined "the owner won't do this and that" (which makes me think you did an assignment), what is it the owner was supposed to do, and didn't, in a L/O?
Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
13y
Sorry, It is just a regular lease purchase agreement, 5 years, 5k NON-refundable down payment with payments of 1000 a month... It also states if they don't pay for 3 months then the contract will be null and void, So far it is April 1st, so by May 1st the contract is void. Tenants do want to leave when I spoke yesterday
Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
13y
No this isn't my agreement with the tenants, I had a seller call me who is in a lease purchase wants to sell the property and get out of it and walk away with cash yeah I wasn't too clear! lol
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
OK. My response would be very different if you were in the middle of a sandwich lease option.
You're wanting to buy from the seller, but he already has an option contract with these tenant/buyers and its still, for the moment, valid. You say the T/B want's to leave. Will they take the $5000 and leave? Or are they insisting on $15,000? I'm not sure if you could just buy the property right now or not. That would be a discussion for a lawyer. But if you can, then the lease and option would still be in effect. Then you could deal with the tenants. But that's doesn't seem particularly amenable to a wholesaling situation. Is the seller now willing to take a price that's enough less than the option strike price for you to take a slice and still leave enough profit to be attractive to your buyer if the T/B does decide to exercise the option?
Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
13y
Yes exactly that was my first idea to see if I can work a "Cash for Keys" type deal with the tenants to make everyone happy. I read over the contract and since it is void after 3 months of non payment I really can't do anything until that is up which would be May, I will explain to the tenants these are the two options, also seller does want out and is extremely motivated. There is definitely good potential in this one to make a good deal whether I can wholesale or buy and list on the MLS
Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
13y
Yes this was a lease purchase, I guess the only option really is try to do a "Cash FOR keys" deal or wait the three months until the contract is void..
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Check with an attorney. When you start giving lease/purchases and lease/options, you create some equitable interst on the lessee's part. I've seen cases where the lessee couldn't be evicted, as you would a renter. Usually the eviction turns into more of a foreclosure. If the seller drafted that "null and void" clause himself, it may not stand up.
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
13y
Hi Wayne Brooks
Here is an idea from an attorney in FL...
Contract for option to purchase and a lease.
Avoids equitable interest by not giving the option til the lease is completed and or other conditions.
http://www.biggerpockets.com/blogs/3/blog_posts/26565-a-contract-for-option-is-better-than-a-lease-option
SFR Investor · Jacksonville, FL · Member since 2012 · 285 posts · 83 votes
13y
I have no idea why ANYONE would allow a tenant to go 3 months without paying, before they evict. Obviously it is ALL about how the deal is structured on the front end. I use a rent to own agreement with 3% down of PP, and then allow work for equity so that over the next year, the WFE and rental principle pay the note down so that the T/B have 10% down. During any part of that 1 year, if they fall behind in payments, they are renting and can be evicted. After year 1, they become equity owners with an Agreement for Deed and I would then have to evict.
If you build deals the right way on the front end, it makes it so much easier for you and the T/B to know where they stand at ANY time. Just remember to maintain control and run this like a business. Lou Brown has a good program I follow.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
If it were me I'd tell the seller I'll the take the property subject to the lease option agreement and currently defaulting tenant buyers, and close asap at a renegotiated, discounted price. The new price would take into account the risks and costs of the lease option and the tenancy.
You have a motivated seller that wants to be done. Why work for free to solve his problem? Buy the property at a great price for you, and then solve the problems for your own benefit.
Real Estate Investor · Salt Lake City, UT · Member since 2010 · 2 posts · 3 votes
13y
This situation is one of the reasons I recommend to NEVER do Lease Options and why you should ALWAYS use a Title Holding Land Trust when doing ANY form of Seller Carry or Assisted Financing. A valid THLT is not an alternative to inherently dangerous seller carry arrangements such as CFD, AITD, LO, LP, LC, RTO, etc., IT IS THE SAFE & LEGAL WAY TO DO THEM.
All of these methods, terms, contracts, etc., can be done within a THLT and eliminate 99% of all the Risk & Liability of such transactions. Believe me, I learned the hard way. If you'd a written copy of My Personal Lease Option Horror Story just say so and I'll be glad to send it to you along with what I learned and how to protect myself from these inherently dangerous seller carry methods and documents.
Real Estate Investor · Salt Lake City, UT · Member since 2010 · 2 posts · 3 votes
13y
Just an FYI: Here's the things the Judge/Court Advised me not to do. BTW, it is the Law in AZ and enforced in other states as Case Precedent.
1. You CANNOT pre-determine a future purchase price or discounted buy out.
2. You CANNOT collect more than 1.5x more than the monthly rent upfront.
3. You CANNOT credit any part of the deposit or rent toward a future purchase.
4. You CANNOT require the Tenant to do ANY maintenance
5. Two Documents (Lease & Option) doesn't matter as long as the Leasee has the Option, it is considered a "Sale", period.
These five things classify the transaction as a "Delayed or Disquised Sale" and gives an Equitable Claim of Interest IN THE PROPERTY to the Tenant which makes them "an Owner" and you can't evict an owner, you must foreclose.
What I learned is, the reason most Tenant / Buyers are successfully evicted is, they don't know their rights "as an owner" and just leave believing they have to. If they appear in court and Claim Equity, the eviction Judge CANNOT hear their case. You must go through with a full foreclosure action instead. Sucks Huh?
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
13y
One choice not yet mentioned is to buy the option from the tenants, if it is assignable. If the tenant's position in this is attractive enough, you buy the tenant's position.
Wholesaler · Brooklandville, MD · Member since 2013 · 149 posts · 29 votes
13y
Originally posted by Jack Bobeck:
I have no idea why ANYONE would allow a tenant to go 3 months without paying, before they evict. Obviously it is ALL about how the deal is structured on the front end. I use a rent to own agreement with 3% down of PP, and then allow work for equity so that over the next year, the WFE and rental principle pay the note down so that the T/B have 10% down. During any part of that 1 year, if they fall behind in payments, they are renting and can be evicted. After year 1, they become equity owners with an Agreement for Deed and I would then have to evict.
If you build deals the right way on the front end, it makes it so much easier for you and the T/B to know where they stand at ANY time. Just remember to maintain control and run this like a business. Lou Brown has a good program I follow.
Thing is I see this all of the time especially with section 8 landlords. Many would rather continue that "free" money of 1250/mo while the tnt is supposed to pay 50.
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
13y
Jonathon Federwisch
From an attorney, it is a hybrid of Contract for Deed or Contract for Sale (CA).
See http://www.biggerpockets.com/blogs/3/blog_posts/26565-a-contract-for-option-is-better-than-a-lease-option[url]
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
K. Marie has the right idea if you are getting into this. While most believe an option ties up a property, it really doesn't as it can be sold subject to the option. You'll need to buy at a lower price than the option, don't forget your selling costs too. It sounds to me like the tenants are eating up what they see as thier equity allowing the option to terminate. I doubt too that a seller who was just burned on an option is in a hurry to do another one. This is a sub-2 transaction and you could have some creative solutions to address the eviction or option being taken, but getting another option doesn't do any good. Cash for keys depends on eviction costs, I would claim the non-payment out weighs the interest acquired, that we are even, and get out 1 May. :)
Wholesaler · Miami, FL · Member since 2010 · 346 posts · 3 votes
13y
I ended up working the deal worked it out with the tenants and it closed! It comes down to figuring out what everyone wants and make them all happy! This happen to be a "Really Really Great Time" and was worth it :P
Investor · Las Vegas, NV · Member since 2013 · 15 posts · 11 votes
11y
Two separate contracts are a must when doing lease options for that very reason. If all else fails when a LO goes bad better to negotiate a cash for keys exit than let litigation take place. The only one that wins in litigation is the attorneys involved.
Also Scott I've seen comments by you elsewhere regarding due on sale clauses as an issue. In some states, such as Nevada, IF a bank were to exercise the due on sale the Note & DOT automatically become a mortgage requiring judicial foreclosure which takes a minimum of a year during which time the property can easily be refied or sold. The Due on Sale clause is not the boogie man that most people think it is.