We have a situation I would appreciate advice on. We’re selling our house on a lease option cause we need to move fast. A couple down the street is interested. They want to move her mother, on Social Security, and brother, who’s disabled in the main part of the house, and put his father, also on Social Security in the garage, and they want my husband, whose a contractor, to convert the garage.
Our asking price for the house as is $140,000, and $1,000 monthly rent. My question is, should we pay to convert the garage and add that to price of house or have them pay my husband to do the work as a contractor? They want to rent for at least 3 years, and then perhaps they would be in a position to buy the house for their parents. We’ve never done this before. Oh, they have a downpayment of $3000 and can pay up to $1,300 monthly rent, the parents that is, all of them putting their SS and disability checks together.
Any advice on this or other ways to structure the deal will be greatly appreciated!!!
Howdy Sherry:
Get as much cash as possible up front. Three grand is not enough. If you still want to do it with the 3 grand then get the other 300 per months as extra for the garage conversion and more down payment. On a $140,000 house some investors want 10% and some would do with half that. You do have pretty stable tenant buyers and that could add to the mix. If you could get them to pay for the materials up front that would be easier to do the conversion. It is all negotiable so do the best you can. It is nice to help old folks on a fixed income move close to their kin but nice to feel secure in the deal too. You have to be the judge
Yes, your right, we’re helping them, and we’re moving for the same reasons. To help our parents in another state. Thanks so much for your advice, looks like things are gonna work out good for both parties!!!
We have a new problem. I met with my attorney to go over the papers for the lease option. He informs me that in our County, if the tenants default, we can’t fight it in Magistrate Court like you would a straight rental. The Magistrate judges would not handle it. If the tenants make an issue of the option to purchase, we’d have to take it to district Court, and you must have an attorney for that. Plus they are backed up because of the growth in the area, so it could take a year to hear the case, and all this time, the tenants could be in our house, not paying the rent. And the judge will likely favor the option agreement in the end.
He recommends making it a straight rental. The people have already agreed to our terms. $146,500 with the extra work converting the garage, and $1300.00 a month rent, $3000.00 down and a three year lease with option to buy.
But now I scared to do the option to buy. I have separate papers for the lease and the option. I’m afraid the people will back out of the deal, if we change things now to a rental agreement only. We really need to move and the market here is remarkable slow. We’re at our wits end here. It’s been over a year trying to sell or rent. I don’t want to do anything desperate though.
What do you think?
Howdy Sherry:
I have been in your same shoes trying to get a tenant out under a contract for deed. I lost in court too. He brought all kinds of BS into court saying that I agreed to give him money for adding on to the house. I have always read to make the lease agreement separate from the option agreement. It may help. If the tenants want to they can get a free lawyer and tie you and the house up for months like you said. You may want to deed the house into a partnership or corp in case stuff gets bad. Then the corp can file BK and it will not hurt you personally as much. The loan is probably still in your name but it will still help to have the house in another entity.
Lets hope all works out for the best. It could be a no win deal if you lease it so you should stick to the lease/option deal. Damed if you do and damed if you dont. If you do not do something with them you could be stuck with the house another year.
Sorry I do not have any better ideas for you.
You don’t know how much your advice helps. Just to run it by another investor, verses an attorney, (they always seem to be so negative about lease options), is a great help. Thanks again!!!