Posted by BR on January 17, 2003 at 22:37:45:
Randy,
It’s your game, you decide how you choose to operate. Most people take a more hard nosed approach than I, and demand another option fee at the end. My choice is to create long term cash flow. I’ll give them an option for as long as they want. I prefer the cash flow to having down time and associated headaches of finding new tenant buyers.
L/O terms-long or short? - Posted by Bryan-SactoCA
Posted by Bryan-SactoCA on January 16, 2003 at 20:15:26:
I’ve been reading Conti and Finkel’s book Multiple Streams of Income book and they suggest a L/O term length of as much as 4 years for the seller and 2 for buyer. Then there’s Bill Bronchick who says that a L/O term length should be no longer than 18 months for either because of equitable interest concerns. Who’s right?
Re: L/O terms-long or short? - Posted by BR
Posted by BR on January 17, 2003 at 09:35:18:
I don’t do sandwich L/O’s so my comments are on the sell side. Any lease of more than three years violates the DOS. No big deal but I don’t give more than 3 year leases. My options are separate and I will give 3 years on that also. Actually I don’t care if they ever exercise the option as I like the cash flow.
Re: L/O terms-long or short? - Posted by Craig-SoMD
Posted by Craig-SoMD on January 16, 2003 at 22:29:09:
I do everything I can to lock the seller up for at least three years, really wanting as much as five years. There are landlords all over the country with long-term tenants in their houses, so what is the issue with equitable interest that Bronchick is talking about? No purchase has taken place and will not take place until the option is exercised, whenever that may be. My tenants I give a one year lease with a right to renew one additional year, unless I only have two or three years with the seller, in which case I may shorten the original lease or may only give them the right to renew for six more months, or whatever I feel like doing. The idea is to do something to motivate the buyer to actually buy. There is a big payday there, so that’s what I want to have happen.
What if they don’t buy? - Posted by randyOH
Posted by randyOH on January 17, 2003 at 15:36:54:
BR,
What do you do when they reach the end of the option period? Do you let them keep renting? Do you get any additional option fee?
I have not had this happen yet and I am wondering how other people handle it. My options are two years. I have been getting $2,000 down on $50,000 houses. I am thinking about giving them another year with another $1,000 down.
Just curious as to how you handle it.
Thanks,
Randy