Lease Purchase Question

General Real Estate Investing
1

I know as the seller my risk would be the tenant claiming equitable interest. I know the tenent would not win in my state because the law is the tenant must have 5 years in the home and or 20% equity to have to foreclose rather than evict. I also understand this does not quarantee that the tenant would not try anyway. My question, is there a limit the bank will allow the seller contribute to the deal as a down payment rent credit or both. I have a property that I would consider offering a 50% rent credit to? Which would be between $800 and $900 a month credit. Would this be allowable, should it be a credit towards downpayment or off the purchase price or both?

2

the tenent would not win in my state because …
You’re in Texas, Bob. The AG has it in for CREI and has enacted changes to laws with regards to LO’s, executory contracts. Google TX HB 1823 and search through this board for complete info.Be very careful not to mess with Texas…
Regards,
Dave

3

Me and my property are in Ohio.

4

Sorry, wrong Bob…lol. I guess I need more coffee. :-[
I’ve never seen more than 6% seller contributions from my lenders, sometimes only 3% depending on their underwriting criteria. You probably already know my thoughts on rent credits. Should you be unfortunate enough to find a professional tenant, one who really knows the law, you might find yourself paying for a mortgage with nothing coming in. Be careful.
Regards,
Dave

5

Thanks for your input. Thats what I was wondering how much can I contribute so would you think 3% would be safe?? From a tenants mortgage standpoint.

6

nearly every lender will allow up to 6% seller contribution on loans up to 80% and 3% on loans over 80%. Please be aware that this is normally used to cover non-recurring closing costs (ie, underwriting, title, etc). If the amount is exceeds the closing costs, it is deducted from the purchase price and loan percentages are figured from the lower price.

7

Thanks for the reply, so how High can these credits go?? Example could it be 3% in junk fees and lets say another 5% off the purchase price??