Posted by Jim Kennedy on July 07, 1999 at 21:29:49:
Lew,
A land contract is an installment selling arrangement where the buyer gets to use/occupy the property but does not receive a deed until the terms of the contract are fulfilled. Since the seller does not give the buyer a deed, legal title does not pass to the buyer; however, the buyer does have EQUITABLE title during the term of the contract.
A lease/option, on the other hand, is a lease under which the lessee (tenant/optionee) has the right, but not the obligation, to purchase the property.
Because of the disadvantages to the buyer, I would not recommend buying under a land contract. Conversely, there are some distinct advantages to selling under a land contract. You?re absolutely right that lease/options are more advantageous for the investor. Some of the reasons are:
Little or no risk
Little or no money required
No credit required
No buying, holding, or selling costs
Does not trigger lender?s right to accelerate under terms of due on sale clause
Non refundable option consideration is not taxable until option is exercised
Investor is not responsible for repairs
If you are interested in doing lease/options, I would strongly suggest that you read a book or buy a course on the subject for a more thorough understanding. There are several courses offered through this website.
Best of Success!!
Jim Kennedy,
Houston, TX