Posted by Gerald-DC on December 13, 2001 at 13:05:40:
Carey,
Here is my take on this. I agree with Tarun. It amuses me when people who may have been on this board for a month or two and don’t even have a basic understanding of a concept, go off on posters with condescending responses or unremarkable and often wrong analysis.
Even if you are an expert or seasoned pro say in rehabs, if the subject matter is sub2 and you haven’t done a deal yet, just shut up and listen but in no way should you be posting comments critizing others who are out there doing deals in this area.
lease option term length - Posted by Bryan in Cali
Posted by Bryan in Cali on December 12, 2001 at 22:04:16:
I’ve read up on lease options, and have two contradicting opinions on the length of terms. Joe Kaiser says to do a single term of up to five years. Bronchick says to not do anything longer than a year. Kaiser is looking at cashflow, Bronchick is worried about a tenant claiming equitable interest in the property. Who’s right?
Posted by Joe M. on December 13, 2001 at 20:33:52:
I have yet to do a L/O but it seems to me the most sense is a one year option with YOUR right to renew for another year up to 4 times. hope this helps, joe
Posted by Tarun_MD on December 13, 2001 at 02:07:08:
Brian,
I am just curious to know how many deals have you done? I am asking you this because the other day you gave me some advice on a suject to deal I was having problems with. Apparently, you sounded like you had done Many…Many subject to deals and that you were a pro. To be honest with you, I thought that your reply to my post was quite arrogant/negative considering your experience in actually doing deals. If you are a seasoned investor and have experience, I apologize.
But after reading this post of yours, it seems like you are still learning the ropes and are unsure about a lot of things.
Brian…I have been lurking around on this website for over 3 years now. I think I have done enough deals to give good advice to people who are just starting out. If I am not sure about something, I shut up and let others who are more experienced answer. The worst thing you can do is give advice to a newbie when you are a newbie yourself.
So please be responsible and do not give advice if you haven’t done a transaction yourself.
Learn the business first, do some deals and then by all means help others. Thats what this board is for.
Take care!
Tarun
Posted by Becky IL on December 12, 2001 at 22:16:29:
Bryan, I personally prefer Bronchick’s advice on this. Not only does it protect you from the tenant claiming equitable interest based on a long-term contract, but it gives you more control to have 1 year leases. If your tenant doesn’t buy after a year (and you don’t like them), you don’t have to renew the lease; if your tenant doesn’t buy after a year, you can require another option contract with another deposit and a higher sale price; also, you can raise the rent at the end of the term.
Furthermore, your objective is to lease/option to a high-quality tenant/buyer that will be more likely to have the ability to pay you on time and give you less hassle with maintenance of the home, etc. The higher “quality” tenant/buyer you find, the more likely that they’ll be able to obtain financing and cash out (buy) your home within one year, so that should be your goal.
With all that said, there is nothing wrong with a 5 year lease, per se, but I think you’ll have more advantages with using a one year lease/option.
Posted by Carey_PA on December 13, 2001 at 09:02:35:
Tarun,
Now I don’t know Bryan from Adam, but I just wanted to throw at you that just because he doesn’t know about L/O’s doesn’t mean that he’s not a “seasoned” pro in another aspect of investing.
YOu know what I mean?? I mean I’ve about 5 mobile home deals (not that makes me a “seasoned investor”) and I’ve sold 1 house via a l/o but i am TOTALLY clueless when it comes to subject 2’s, and I’m sure other stuff as well…
Again, I wouldn’t know bryan if he was right in front of my face and I do KNOW of your name, but I just wanted to throw that thought out at ya!
If you wish you could use a 1 year with an automatic right of renewal. I would be concerned that the court could decide you actually had an installment contract. The shorter term helps avoid this.