Posted by Chip on April 28, 2001 at 20:21:06:
Thanks- yes I realize I couldn’t sell an option, just mistyped this in my confused state of mind this afternoon. I tend to agree so far, the icing is pretty much off the cake without the option being available, and the ability to get upfront and backend profits.
L/O: What if L/S doesn’t want to sell?? - Posted by Chip
Posted by Chip on April 28, 2001 at 13:32:15:
Found an interesting situation: Seller JUST bought a (BRAND NEW) house (closed yesterday!) and found out they must move to another city for work. They don’t really want to sell, but will gladly lease to me knowing I will sublease. Of course, without the ability to offer an option, my tenants are, well, TENANTS!! Up goes turnover, repairs, problems… I can get the house for 1450/mo and probably sublet for 1700-1800. My quandary is: can I live-up to the promises of a l/o without the FIRM option to buy?
How can I put this together? Seller MIGHT want to keep the house, so I would have to refund the option monies collected if he does so.
Any ideas besides let him keep it vacant for awhile??
Re: L/O: What if L/S doesn’t want to sell?? - Posted by phil fernandez
Posted by phil fernandez on April 28, 2001 at 15:38:47:
I do some of these. Without the option component. I will master lease the owners house at a lower rent and gurantee that rent and pay up to $100 of repairs per occurance, limited to one occurance a month. I then advertise to rent the place out for more than I have to give the owner.
Let me give you an example. I master leased an owners house for $500 per month. I then basically subleased this house to my tenant for $950 per month. The spread minus the small repairs of $450 per month was my profit. Factoring a yeras worth of small repairs my monthly profit was a little over $400 per month. Pretty good for just controlling a property without the obligation of owning it.
So forget the option part. As JohnBoy said, you can’t give someone an option if you yourself do not have an option on the house.
What you have to do is get the rent owed to the owner down to the point where you can make a decent monthly profit. If I were in your shoes on your deal that you present here, I’d offer the owner a guranteed rent of not more than $1,000 to $1,200 per month. The better you can negotiate, the more monthly cashflow you will acquire. Remember that they have just bought another house and are moving into it, so they need you more than you need them.
Re: L/O: What if L/S doesn’t want to sell?? - Posted by JohnBoy
Posted by JohnBoy on April 28, 2001 at 13:53:17:
Refund what OPTION monies? You can’t take any OPTION money without giving the option to buy. If you took money from someone as option money and they decided to exercise their option to buy, what are you going to do when you don’t have an option to buy from the seller??? You can’t give an option on something you don’t own or control with an option and having no way of delivering clear title to the property.
You could only get security deposits from sub-leasing to a tenant.
Personally, I wouldn’t want to deal with the headaches of being a landlord by subleasing someone elses property. If your tenant stops paying rent and ends up trashing the place it’s you that will be liable to the owner of the property to pay for everything. That could eat up your cash flow in a hurry, plus some, on the rents you collect
Re: L/O: What if L/S doesn’t want to sell?? - Posted by Chip
Posted by Chip on April 28, 2001 at 20:26:38:
This makes sense, but the profit potential is stripped-down so much compared to a standard l/o, it just doesn’t seem worth it. I think they need to ripen a little bit. I don’t think I could make any guarantees at all about repairs or even occupancy with my hands tied in this manner. Maybe I just do it on a percentage basis… I collect rent and send them 75% of it, and let them pay repairs too.
Thanks for the reply.