Posted by Tony Colella on February 07, 2005 at 16:10:39:
He may well be correct. What I believe your attorney is referring to is the “equitable interest” argument that your tenant/buyer could bring up. In essence, they argue that even thought they are renting, because the lease/option (in their opinion) is a form of owner financing, then the tenant/buyer has equity in the property which means that they must be foreclosed upon instead of evicted for non-payment of rent.
Lease/Option gurus often suggest investors who sell via lease/option use 2 separate documents. One being the lease that does NOT mention any option to buy, and a separate OPTION to buy. When going to court for breach or non-payment, the investor does so under the lease and proceeds as if this were a traditional landlord/tenant action.
I would not suggest you deny the existence of the option if asked in court but if not asked or the tenant does not bring it up, proceed with the eviction. Let the tenant decide to hire an attorney or do the research to successfully argue an equitable interest argument.
If you are investing in such away that you will continue to own the land and either lease/option or sell the mobile home separate from the land, you increase your control over the deal through you rights as the land owner.
There are other considerations with lease/options that you should take into consideration. Ernest Tew, for example, wrote his Triple Net Lease in such a manner so as to provide him with little to no maintenance, greater control through eviction and (a topic not yet mentioned in this string…) structured the payments so as to address the concern that the IRS will see that this really is nothing more than owner financing and treat the lease/option as a sale, rather than a rental (which could get ugly if they do so retroactively). The old rule of “if it looks like a duck and quacks like a duck…” may prevail. So if it looks like a sale (example, the lease payments terminate along the same timeline and payment schedule as the installment sale would have…) you may have yourself a duck. You should research this topic as well before proceeding
A good lease option course here should address all of these concerns and more.
Scott you said you do lease options on land homes where did you get your lease option forms? Do you pay the insurance on the home or does your tenant?
thanks
Posted by ScottS(NC) on February 01, 2005 at 20:27:43:
AL,
I don’t do many of these as I prefer straight rentals. I did however have my attorney provide me with a state recognized L/O form. I would suggest you contact a local Real Estate Attorney in your area he/she could get you one thats state specific for just a few bucks usually. HTH Take Care, ScottS(NC)
Posted by JP(SC) on February 02, 2005 at 17:50:18:
Hi Scott,
This is not a follow-up to your comments. Rather a new question stemming from your straight-rental strategy.
I bought a Lonnie deal in a local park and I am in the process of getting it sold. However, the park owner told me that he has no problem if I just want to rent it out. What would you do in this situation? Is renting out a home that is in a park generally advisable in your opinion?
Posted by ScottS(NC) on February 03, 2005 at 08:43:38:
JP,
How’s it going, In your situation I highly reccomend a Lease option strategy. By doing this type of Lonnie deal you get the best of both worlds. You can evict as a rental(quick and easy), you can have the tenant buyer take care of all maintenance(make sure its spelled out in your (lease)with option. Finally you can eventually have the property payoff. Lease option type Lonnie deals are the Only type I will even consider here in NC(Land/Home’s are my prefered deal). I have had enough with the Repo process here, very complex, very slow, very costly compared to an eviction, which I can have done in slightly less than 1 month. HTH, Take Care, ScottS(NC)
Posted by David (eNC) on February 03, 2005 at 11:07:45:
Scott,
Can you describe the structure of the deal. For example, if I “sell” a mh for 12,000. I get 1000 “down” for the option to buy. Then 300/m rent payments (applied to balance right?). And then one final payment of 500 at the end to exercise the option? Is that even close to how it works?
Posted by ScottS(NC) on February 03, 2005 at 20:04:43:
David,
Lease options really are quite flexable. I don’t do these regularly but what I do is, Take as much option money up front as I can get. Then I Simply take payments until the balance of the price of the home is paid off. I don’t require any balloon payment at the end. If they leave early I keep the option money and go on to do it again. Its really nothing more than a lease with a down payment I keep no matter what happens.
Their are many other ways to do Lease options and I recomend you get a course or book if you plan to do these. They can give you all kinds of different twists, and things to put in the lease, to tweak it to help convince the tenant/buyer to complete the deal. HTH Take Care ScottS(NC)
Posted by David (eNC) on February 03, 2005 at 21:15:24:
I called a real estate attorney friend of mine and asked if he could give me a standard fill-in-the-blank lease/option contract. He said he would at no cost (do you believe that?). I should have it tomorrow. But he also gave me some unsolicited advice…even though I did not tell him what I had in mind, he warned me a the problems associated with getting a NC tenant (buyer) out of the home for non-payment. He said I COULD NOT go to small claims for eviction, that I would have to go through the court process. What has been the experience of others in NC?