Great Business Idea, But is it Legal? - Posted by Craig S

Real Estate Investing Real Estate Law
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Posted by Lyal on October 19, 2004 at 05:58:15:

You’re looking for a legal opinion. This forum is for “general” real estate questions with a legal theme. You need to talk to a local real estate attorney.
Lyal

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Great Business Idea, But is it Legal? - Posted by Craig S

Posted by Craig S on October 06, 2004 at 11:59:23:

On the main forum, someone from Ontario keeps touting a great business idea, but I’m not sure if it’s legal in California without a brokers license. He calls it a Cooperative Assignment. In essence, you are setting up a Lease Option for a seller, so he gets above market rent and above market sale price if the option is exercised, and you get to keep the 3%-5% option consideration (in California, that’s like $10,000-$15,000!!!)

He is setting it up as an assignment, where he contracts with the seller and assigns the contract to the buyer. Could one do this in California?

Alternatively, If one didn’t want to ever be a principal in the transaction, could they create a separate contract with the seller for their services, where they provided the necessary lease option contracts and found a tenant/buyer. They would then assist the seller and tenant/buyer in signing an agreement. They would be paid the option consideration per the separate agreement they had with the seller and have no further obligation.

BENEFITS TO HOMEOWNER:

  • great appreciation, even if area prices decline
  • higher than market rent!
  • on-time rent payments ‘guaranteed’ (if late, tenant pays late fees and foregoes rent credit for the month)
  • no more petty maintenance calls or expenses
  • less wear and tear, because tenant has pride of ownership
  • full tax writeoffs as an investor
  • no realtor fees, escrow fees, etc upon sale
  • they don?t ever need to market the property for sale down the road
  • I guarantee to remarket the property for them and find a new optionee (note that I get another 5% at that time!!!)

I GET

  • $10,000 to $15,000 for small amount of risk and moderate amount of work
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Re: Great Business Idea, But is it Legal? - Posted by Andrew

Posted by Andrew on October 26, 2004 at 14:29:33:

I won’t weigh in on the legality of he cooperative assignment, but I’d refer you to Michael.Carbonare’s “N@ked Investor” website and lease-option manual. www.n@ked-investor.com. (Due to the automatic censoring of this forum, replace the “@” sign with the letter “a” when transferring the URL to your browser.)

P.S. We do it in Maryland…