Selling Lease to purchase - Posted by Steve Cook

Posted by JohnBoy on July 29, 2001 at 16:12:44:

I wasn’t asking how because I don’t know of any possible way for him to to do it. I was asking how HE was PLANNING on doing it.

As to your statement. I don’t think getting refinanced at 80% LTV “despite” bad credit is going happen. 65% LTV using a hard money lender might fly, but getting a loan through a bank at 80% LTV despite his bad credit will be very unlikely!

That wouldn’t be enough for me take the risk with someone.

I want that person I’d be financing to tell me how HE intends to cash me out in 3 years. I want to know where HIS thinking is in this and how he plans on accomplishing this.

Telling me I could get refinanced for 80% LTV in 3 years despite his bad credit isn’t going to cut it.

I want to know what he plans on doing about getting his bad credit CLEANED UP within 3 years so he COULD get refinanced. That would be just for starters!

Selling Lease to purchase - Posted by Steve Cook

Posted by Steve Cook on July 28, 2001 at 23:06:32:

I have a buyer interested in purchasing a 5 plex from me who has no money, poor credit and wants to a chance to get started in realestate. I know it sounds crazy for me to even think of selling to a person for no money down, but I’m ready to get rid of this property and he tells me he can cash me out on a 3 year balloon. He seems ambitious and hungry to make a go of it. Any important tips or suggestions on how to structure this Lease purchase so that I don’t loose massively if I should get it back?

Re: Selling Lease to purchase - Posted by Ronald * Starr

Posted by Ronald * Starr on July 30, 2001 at 20:16:41:

Steve Cook-------

I would think five units is not a very good place for this person to start. The loans are not as good and as easy to get as for 1-4 unit properties, as I understand it.

If you could get some other buyer for this property, I would recommend you do so. Then maybe sell or lease-option some single family property to this person.

Another way that might work is to have him get a partner or guarantor to go on with him.

I think Bill W’s suggestion of a short-term lease with renewals makes sense. But not with him having the option to renew. With you have the sayso whether he can renew. If you don’t want to renew with him, give him about 3 months to do something with the property. Either buy it, or sell it.

Good InvestingRon Starr*******

How about this… - Posted by BillW

Posted by BillW on July 29, 2001 at 24:11:52:

Why don’t you offer him a 1 year option with two one year extensions if he performs. Let him “manage” the units (under your supervision) the first year to show you that he is OK. After the first year, maybe relax the supervision. To his advantage, if he actually does perform, you could credit him an amount to be determined for successful performance. If he screws up, don’t renew the option. Put the responsibility on him to perform. He must be showing you something if you’d consider this. Maybe he’s got a plan that could be workable.
good luck,

Re: Selling Lease to purchase - Posted by wayne

Posted by wayne on July 28, 2001 at 23:14:32:

If the interested buyer has no money, and poor credit, then how will he attain the money for the baloon? I would be very cautious if you do decide to give him the chance, he may cause more problems than they are worth.

Also, if he is wanting a chance to get into real estate, what background does he have in real estate. Obviously he is just starting out, but what research, and what amount of time has he devoted to learning the trade.

Just a though


Re: Selling Lease to purchase - Posted by JohnBoy

Posted by JohnBoy on July 28, 2001 at 23:13:14:

One question.

He has NO money, POOR credit, but he TELLS YOU he can cash you out in 3 years.

HOW is he going to be able to do that?

Re: Selling Lease to purchase - Posted by Boru

Posted by Boru on July 29, 2001 at 15:58:58:

It would be easy for him to cash you out in 3 years despite his poor credit and no money. The responses previously do not understand RE much, especially multi-units. However, this individual will need good management skills. If in 3 years he gets the rental incomes up and the expenses down, thus increasing his net operating income significantly, he would be able to get the property appraised at a much higher value and refinance with a 65-80% LTV despite bad credit. Make sense? However, as mentioned previously from the smarter respondent. Watch individual’s management skills closely in the first year.