Posted by Russ Sims on May 27, 1999 at 12:34:35:
Julie:
Is your intent to sub-lease/option it out to a tenant/buyer (called a sandwich lease), or to simply rent to a tenant? If you’re doing a sandwich lease, I wouldn’t be overly concerned with doing a lot of repairs. The type of propspect you’ll attract probably won’t be too picky about leaky faucets or a tear in the carpet. These are things they can fix themselves, just like a homeowner would. That’s the great thing about lease/option tenants. You will find that many gladly accept imperfections because you’re giving them something they have difficulty finding anywhere else: a home of their own!
I can see Sheets point about sticking with 3br homes (or larger). You’ll have higher vacancy rates in a 2br. But if the area of town is good, and the place is in good shape, and if you select your tenant well, you can still make good money. The problem is most folks looking for rentals are young families with kids. 2 small children can share a bedroom for a while, but as they get older it will be a tough sell.With luck you’ll find a childless couple or an older couple looking to downsize.These could be great long-term tenants. On the other hand, if you want to do a sandwich lease, you may find your phone ringing off the hook with folks wanting to lease/option an affordable home of any size. They just want to get their foot in the door. This has been my experience.It took me less than a week to lease option my little 2br out. The couple are happy as clams and they are fixing the place up with updates I couldn’t afford when I was living there. I’m not too concerned with getting this house back!
You can record your contracts at the county recorders office. In my area they charge $8 per page.
Good Luck
Russ
Lease Option Help!!! - Posted by JulieW
Posted by JulieW on May 26, 1999 at 14:25:47:
I am going to make an offer on a 2br 1ba house in a highly sought after neighborhood. I am going to ask the owners to lease option the house to me with the intention of using it as a rental. BTW the house is owned by three siblings and there are no mortgages on house. My concern is that CS is totally against anything smaller than 3br. This house does have a garage and carport so the garage could be made into third bdrm but costly and time consuming. What kind of repairs should I be concerned about making before I try to rent and also can I advertise the house for rent? Also when CS says record the option in public records how do I go about doing that? I’ve just gotten started and have a contract on another house so credit lines are somewhat limited right now. Thanks for any helpful suggestions.
JulieW
Re: Lease Option Help!!! - Posted by JohnBoy
Posted by JohnBoy on May 28, 1999 at 02:31:33:
You can record the option, BUT, that will only cloud the title in the event the seller was to try and sell the property out from under you. What it won’t do is protect you from any future liens that may be filed against the property. If the seller was to get into some kind of trouble and had a judgement filed against him a lien could be placed against the property. When you go to exercise the option that lien will need to be paid off before you could get clear title to the property. If the seller didn’t have the money to cover the lien then you will get stuck having to pay it in order to get clear title. At that point you could walk away and not exercise your option and take your losses. BUT, if you have a sandwich lease option on the property and your subtenant decides to exercise their option then your going to have to satisfy that lien if the seller is unable to in order to protect your tenant/buyers interests. Otherwise you could be the one getting sued for not being able to deliver clear title.
The best way to protect yourself is to record a “performance mortgage”. This will place any possible liens that may be filed against the property behind you. This way you won’t have to worry about the liens and you can still get clear title if you or your tenant/buyer decide to exercise the option.
Also, I wouldn’t use CS l/o contract. Your much better off getting Bill Bronchicks contracts for this type of a deal.
You can get his l/o course from this site. It comes with the proper contracts to use and I believe it comes with a copy of a performance mortgage. I would HIGHLY reccomend getting his course if your going to do l/o’s. A little money spent now to properly protect yourself can save you thousands later on down the road if your not properly protected.