Leasing a Lease Option

General Real Estate Investing
21
whether he deposits it into escrow or keeps it in his filing cabnit makes no difference. In either case, title has not been conveyed. If he dies, even with his instruments in escrow, you will still have to go through probate. This mere fact only proves my point.

That’s not accurate.

“whether he deposits it into escrow or keeps it in his filing cabnit[sic] makes no difference.”

Oh, yes it makes a big difference. If my deed is parked at the seller’s house, and not with a bonded and insured 3rd party, and the seller dies, then it is definitely going to be a probate issue. Of course I never said this is how the transaction is handled. So why recharacterize it this way?

Meantime, in a professionally handled escrow, probate has no bearing on this transaction. No other action is required of the seller, dead or alive, much less of his executor or administrator. Everything now depends on my actions, not the seller’s.

Anyway, you’re going down “technical lane” here on me, and I’m not interested in presenting the “skeptics seminar” on lease/options.

I do recommend Todd Toback or Barney Zick for a better idea on this concept and the technicalities involved in successfully doing a lease/option/resale.
:beer

22

"Oh, yes it makes a big difference. If my deed is parked at the seller’s house, and not with a bonded and insured 3rd party, and the seller dies, then it is definitely going to be a probate issue. Of course I never said this is how the transaction is handled. So why recharacterize it this way?

Meantime, in a professionally handled escrow, probate has no bearing on this transaction. No other action is required of the seller, dead or alive, much less of his executor or administrator. Everything now depends on my actions, not the seller’s."

I bring this up because your argument is that as long as the deed sits in escrow, your method works. Using the death of the seller is just one example as to show you the flaw of your logic. You can have equitable title (or interest as you call it) just with the option alone, but that doesn’t give you marketable title. Marketable title doesn’t happen until you hold legal title. Title does not convey unless a deed is delivered. A deed in escrow is not considered delivered. By the way, delivery must take place before the death of the grantor. :wink:

"Anyway, you’re going down ‘technical lane’ here on me, and I’m not interested in presenting the ‘skeptics seminar’ on lease/options. "

Trust me, the lawyers will run you over on “technical lane” especially when their client comes to them crying that they agreed to an unsecured promissory note for 750k and now you are ruining their credit because they couldn’t make the payments.

I would further state that if you are collecting the payment on the unsecured note and using it to pay the owner the monthly rent and pocketing the difference as you state in “Our cash flow is $1,938/mo”, then you are not assigning your lease, you are subletting the lease. Big difference. Anyway, I will get off the technical lane.

I am also not a skeptic, just trying to understand how your method works. You were nice enough to provide a real life example and either you are unable to articulate the logic behind your method or I am too stupid to discuss this with you. I think it’s the latter as I have no access to the exact paperwork and specific steps you use to pull it off.

“I do recommend Todd Toback or Barney Zick for a better idea on this concept and the technicalities involved in successfully doing a lease/option/resale.”

Thank you and again, thank you for your time.

23

Well, I guess the bottom line regarding this discussion, is that we can convey our equitable interest to an end/user buyer using at least three vehicles; a lease; an option, or a Land Contract secured with a personal note.

Meantime, the issue is being able to provide a marketable title to our buyer at the time he pays us off. If we’re unable to do that, for any number of reasons including that we don’t have exclusive right to the title; didn’t actually get the title; didn’t put the title in escrow; didn’t have the seller cancel any open lines of credit; didn’t check the title before we closed with the seller; didn’t file a memorandum of option against the property to protect our position; or perhaps simply trusted the seller to give us the title coupled with a “promise” not to die before there was constructive delivery of the deed… then we might have a problem. Otherwise, this is the lowest risk transaction I know about.

24

Hey Javipa, good stuff on that lease option and land contract strategy. Is there a simple step by step guide somewhere that maybe you could shoot my way so I can try? That’s a brilliant idea man. Thanks. Talk soon.

25

Thanks!

I don’t have simple, step-by-step, guide. If I did, I would be selling it! :biggrin

When I do, I’ll let you know! :beer

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Read any and all of the Provisions of the Lease Option before you sign it and make sure you don’t sign it if it doesn’t allow for sub-leasing!

27

If the lease do allow sub-leasing make sure you have insurance just in case the person sub-leasing destroy the place.

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HAHA! Dramatic indeed. I’m scouring Houston looking for this deal as we speak!