owner finance, rent lease questions

WARRIORWELDING

WARRIORWELDING

Owner opperator Of WarriorWelding LLC.
Joined
Jan 6, 2008
Location
Chillin, Hwy 64 Mocksville NC
I have a house that a gentleman is interested in rent/leasing with option to buy. We want to work it out between just us. The home also needs a little work and may be a part of the rental arrangement. I've known this fellow all my life and each of our families know each other. He can't get credit after a messy divorce and I don't have all the cash on hand for some of the needed work. It needs exterior siding (love to replace the windows), flooring, and paint. Any ideas? Thought? Pro's/Con's? I'm not struggling to afford to keep the place. I just don't have the cash to do what I want to it. It is also an hour away from where I live now. I'm also not interested in a short sale or giving it away. I put a good deal down on it and selling way short feels like a kick in the balls. Chalking 14 yrs of payments on time plus some principle to a shitty first marriage and high rent would be hard to swallow.
 
Sounds like it could work out. Be sure to draw up a good lease/purchase agreement. They are usually 2 separate documents and you can find samples online. I've never done one because I do my own work on rehabs and sell them. Plus, I don't like knowing that a tenant could tear the house up if they felt like it. I've been told that it rarely happens on a good lease/purchase deal.
 
samples online? I'll check into that. Any other advice?
 
Most people do a lease option in one of two ways. One-To do it legally ,and bind him to the home right away, you have to get a lawyer involved. The house goes to him in Deed and Title and you become just the lean holder. So like any closing there will be costs associated with it, but this then puts the responsibilities of Insurance and Taxes onto the man purchasing the home from you..In this instance though, you are just the lean holder, which limits your ability to inspect or make many demands on the home.
Two- He rents from you over a period of time and there is an agreed amount of rent paid. He pays more than the agreed amount of rent and that money goes into an Escrow account. At the end of the agreed rental period the money he has paid over the amount of rent is what he uses as a down payment , while he tries to acquire financing for the home.You still have the option of being the lean holder in this case. This way doesn't necessarily involve a lawyer until the termination of the rental period, although for your protection I'd involve a lawyer in either instance and make really clear and concise expectations written out and signed by all applicable party's .
 
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retroedaddy said:
Most people do a lease option in one of two ways. One-To do it legally ,and bind him to the home right away, you have to get a lawyer involved. The house goes to him in Deed and Title and you become just the lean holder. So like any closing there will be costs associated with it, but this then puts the responsibilities of Insurance and Taxes onto the man purchasing the home from you. This way usually requires him putting an earnest down payment on the place, like 10-20%. You can't fake the down payment either, the lawyer will want it written to him in a Certified Check that will include his closing costs and then he will write a check back to you after his costs are taken out.In this instance though, you are just the lean holder, which limits your ability to inspect or make many demands on the home.
Two- He rents from you over a period of time and there is an agreed amount of rent paid. He pays more than the agreed amount of rent and that money goes into an Escrow account. At the end of the agreed rental period the money he has paid over the amount of rent is what he uses as a down payment , while he tries to acquire financing for the home.You still have the option of being the lean holder in this case. This way doesn't necessarily involve a lawyer until the termination of the rental period, although for your protection I'd involve a lawyer in either instance and make really clear and concise expectations written out and signed by all applicable party's .
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Your correct except there is no requirement for the buyer to put down any amount of money for a down payment. Earnest money is just money given when using a realtor to show the seller the buyer is serious about buying the property. There again there is no required amount to be given.

But yes if you do this please get a lawyer to draw it up. Just remember if you owner finance and they default you must go through the foreclosure process to get him out which is quite expensive.
 
lockedup5 said:
Your correct except there is no requirement for the buyer to put down any amount of money for a down payment. Earnest money is just money given when using a realtor to show the seller the buyer is serious about buying the property. There again there is no required amount to be given.
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You are correct, I guess I should've said it's a good practice to,I'd want someone to be vested in the home to show they were serious. I fixed my post though, thanks !
 
This sounds like a disaster and a good way to loose a friend.

Renters are rarely qualified to work on your house with a good outcome. Hell, many contractors are not qualified to work on your house with a good outcome.

In the end, the nice guy always looses his ass, so be careful. Business is business, regardless of who the business is between. Make sure you have everything in writing and CYA.

Be sure that whoever you are financing the home through knows about the situation as well. Many lenders are not too fond of leasing out properties when they initially closed on financing.
 
Go to bigger pockets dot com...its a real estate investor site.
Read up on how ibvestirs structure lease purchase agreements.
You want the equivalent of a triple net on a resi basis.
 
Ron I'll read up on that, because that don't read like engrish! I have no idea what that last line means...
 
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