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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: freeus who wrote (3370)	9/24/2000 12:28:29 AM
From: adairm	Read Replies (1) \| Respond to of 65232

Freeus: This sounds like a very good opportunity to use the Lease-Option. Reasons: You could delay the sale of the property until you have moved to you new location, and have identified a new property to 1031 into. Your tenant could pay his "downpayment" (a.k.a. option premium) in installments over several months. They should be non-refundable should he decide later not to actually close on the house. The "downpayment" is not considered taxable income until either he buys the house, in which it will be treated as part of the capital gain, or he decides not to buy the house, in which case it is considered additional rent. Consider that most lease option contracts do not close. That is, tenants have a tenant mentality. They don't want to own. (For whatever reason.) So, unless you force the sale, (make him apply for a loan, or give him owner financing, etc.) he won't close the deal. Oh, he'll sign a lease option, he just won't follow thru and buy it! And that's probably OK! If houses are selling in 5 days, it sounds like you could sell this house any time you wanted. There's no reason you should have to take back owner financing if you don't want to. Now, as to pricing... Here it gets tricky. Lease options typically have a price that's higher than market. To protect the seller. I dunno the price of the house we're talking about, so I'm going to go with a round number, say $100,000. Let's say the house is worth $100K market value. You sell the house on a $110K lease option. Why so high? Well, the contract is probably 1 year long. He won't get serious about buying until just before it expires, and who knows how hot the house market will be then? Maybe houses will be selling in 2 days! If you give him a renewal option, make sure the price goes up! You can renegotiate a new price in a year, or set an escallation clause in now. Example, the price goes up 10% a year. Or 1% per month. If you have been renting to this tenant for a while (a year or more) and you can document his payments (deposit slips, or he has cancelled checks) you can be his credit reference so he can qualify for a loan at a bank rather than you have to take back a note. You wouldn't believe the deals there are for first time homebuyers. It sounds like you want to help out your tenant, and that's good. A lease option can let you 'defer' the sale until you're settled into your new place and have found replacement property. However, be fair to yourselves. Don't give your proprty away. Sounds like it's a hot market, so you should get a good price. If he buys the place, and the market stays hot, he'll be sitting pretty in a couple of years, too. Adairm@yes,i'vebeenonaTVinfomercial.com