Posted by Craig (SoMD) on November 06, 2002 at 20:59:08:
Using a L-O is awesome as a seller. First, you collect a sizable amount of up-front option consideration that is non-refundable. This is not like a one month’s rent security deposit, but more like an $8000 to $12,000 chunk of change on a $200,000 place(or better if you can get it.
Then you create some cashflow on the monthly payments. Get whatever you can manage.
Then, your asking price to a seller is not what you would offer it for today, but even higher - more suitable to what the market will be like several years from now, or whenever you hope to close. I recently did a L-O with a $30,000 up to the price I got it for now, and that was on a two year option. Believe me, there is definitely cash to be made selling using a L-O. And it is such a great way to, in effect, owner-finance. And you don’t even lose if the person does not want to exercise the option - keep the option consideration, the monthly cashflow, raise the selling price and monthly rent, and do it all over again. What a deal!!!
Posted by Gambino on November 06, 2002 at 20:23:20:
Hey everyone -
My SO & I currently own 6 units, 4 rentals, and 2 homes that we are fixing up to sell. We started investing this year and so far so good, definitely some good learning opportunities!
Here’s the issue - we were approached to rent our (my) house to a current business contact. He is interested in lease-optioning it from us. I definitely understand most of the benefits of the lease-option from the buyer side, but not from the seller side. My assumption has always been that lease-option from the seller side were motivated sellers trying to get out of something. Can I make money on this deal? My house is relatively new (1999), no problems, so I believe I could get full market for my house. The potential lease-optioner also wants to look at owner-financing.
Do I use this as an oportunity to get some profit from the lease (1year) and then sell to him at a right at market rate? I believe his issue with a standard loan is he is highly leveraged due to medical bills. He makes good money, and has a very solid job.