Posted by Michael(KCMO) on December 06, 2007 at 17:52:29:
I don’t know who you’re referring to specifically when you say “Many Lonnie dealers seem to be going the lease/option route” but of the ones I know of going that route is more out of an advantage in landlord/tenant laws than anything. It can really be set up either way you prefer. Depending on where you’re at or on you’re particular circumstances then one may have a particular advantage over another.
In my area I prefer a straight sale on a Promissory Note. I found l/o’s to be an extra bookkeeping hassle that had no advantage for me over a straight lonnie deal.
As for repairs after the sale . . .
A lease/option can be set up either way. A “triple-net” lease, as explained and used by Ernest Tew, makes the tenant-buyer responsible for repairs.
Even when selling on a Prom Note, even though the homes are sold as-is, if there is a mechanical issue (furnace, a/c, elec, plumbing, etc) within a reasonable time-frame of closing (30 days?) I will usually go back and fix it. I do this even though the home was sold as-is, w/o warranty and even though I have no legal obligation to do so. I do it b/c I want to provide a good product and I had I known it was broken before I sold it I would’ve fixed it anyway.
On a more practical level, if the buyer has just given you their last $500 in down payment and the furnace or a/c goes out they don’t likely have the money to fix it anyway. So what are you going to do . . . let the home deteriorate b/c the plumbing is now freezing or they can’t afford to fix the plumbing leak which is rotting out the bathroom floor? I’d rather fix a small problem now than a big problem later when the home has deteriorated due to lack of mainenance and the buyer walks away.
I’m not feeling too articulate at the moment so hopefully you followed all that.
Re: Anyone Not a Landlord? - Posted by Michael(KCMO)
Posted by Michael(KCMO) on December 06, 2007 at 07:08:03:
I’m not sure I understand your question, JJ. Are you equating Lonnie Deals with being a landlord? If not, then I, among many others here, qualify as the example you’re looking for. While I have done rentals previously (have 3 left) my current business model is strictly Lonnie Deals and notes. No rentals. No l/o’s. Strictly Lonnie Deals and notes.
Thanks for the reply, Michael. Lonnie states in his books and tapes that we should stay away from the business of “after the sale” care. Perhaps I should have stated that he indicates that it’s too much LIKE landlording.
In other words, after the sale, repairs and problems like roof leaks, water heater problems, electrical and so forth are the sole problem of your buyer. I spoke with many folks that were really stressed with all the problems they had to respond to at all times of the day and night.
What I think might be driving this is the increasingly strict regulations from some states to require even the little guy to rent an office. Many Lonnie dealers seem to be going the lease/option route. Lonnie says you could write a clause making repairs the buyer’s problem. Perhaps I misunderstood what I was hearing from other conference attendees.
I’d just want to concentrate on minimal or no repair, sell the home and go on to the next one, free and clear of repair problems of the one just sold. Welcome your thoughts on this.