Lease in Lease Optioning

General Real Estate Investing
1

Let’s say you get an option to buy a property in five years.

How long is your lease agreement for? 5 years? 1 year installments? Month-to-month?

I know many claim to always have separate lease and option contracts, so how long would the lease agreement be for?

Thanks in advance…

2

Howdy Tbonesmith:

I would make the lease 5 years at a fixed low rental rate. May as well lock in the cheapest payment you can for as long as you can

2 cents accounts payable please

3

Thanks Tedjr,

I definitely see the logic in securing the lowest possible rent rate, but doesn’t that fail to leave and “out” if you need to get out of the property two years down the road? How do you limit your liability in this case? Do you put a special clause in the contract?

It seems like if the seller has a lease agreement and you break it, then he has an easy case in court.

Thanks again for your help.

4

I believe most L/O come with a nice sized Option Fee that would make any owner not care to go to court when they just took several thousand dollars of your money and you walked away from it.

5

When you are on the buy end of a sandwich lease you want the option and the lease to be the same document to prove equitable interest. You would want it recorded and you on the insurance policy. You would want them to put title into a land trust and have them sign a performance mortgage so you could foreclose if they didn’t want to or couldn’t convey clear title. Heck, why not do it subject to with that forfeiture clause and do it right.

6

Hey bud,

That actually brings me to another question. How do you decide what type of strategy to use as far as how to gain control of the property, i.e. L/O, sub2, installment land contract, etc?

Do you use certain ones for different types of properties? Do you always have a favorite that you try to use no matter what?

7

L/O always have the problem with title and insurance that can’t guarantee they can perform. CFD just have too many pitfalls and like the L/O without giving a guarantee on title.

If you can’t steal it for cash or good owner financing then I have to go for subject to.

I’ve used Gatten’s method of Subject to on rehabs, owner financed and low equity. Some buyers have crashed, some properties are alligators. but there are enough buyers sooner or later to make them worthwhile.

8

Sorry, but what is CFD?

9

Contract for Deed (CFD)

Wilson