I have a guy who is inetrested in buying a property he likes. I told him I would buy it then sell it to him for a profit. good guy but never know when they default on payemnts so i try to be ready. I thought the best thing is to set it up so its not a land contract (I was told foreclsures in ohio take years). how do I do it with a lease and added an option to purchase seperatly.
property price 12,000
escrow violations 10,000
total purchase price 22,000
purchase price to the guy 36,500
guy has $5,000 as down payment
payments of $375 a month
for 7 years (84 months): $375*84= 31,500
property paid off after 84 months
Taxes ar $100 per month
insurance $50 per month
How do I structire this so should there be a battle the judge will never see it as a land contract and asks for foreclosure (as opposed to an eviction)
$5,000 non-refundable option fee
rental lease $625 rent per month
$125 credit towards purchase every month rent paid on time
$250 seller contribution every month rent is paid on time
credit per month adds up to $375
for 84 months tenant/optonee has paid off purchase price
renew option to purchase every 12 months 6 times
A real quick opinion. Do this for only a year or two and require them to finance you out. Maybe make it a Lease Purchase, no Option. Its not a good idea to run full term on either Lease methods. If this goes 3-4 years and you do have a conflict with the t/b then the judge may rule they a heavy equitable interest and call it a Land Contract. No I didn’t do the math. Herbster
Jay, this deals needs to be in your favor, not the tenant/buyers. If you go years out on this deal, the potential for a liberal judge to rule that the tenant now has a viable financial interest greatly increases.
Set up a one year lease with option to purchase. If, at the end of that one year, the t/b can’t buy or doesn’t want to, your hands aren’t tied and you are in control as to what you want to do next.
Do the standard rental lease, then make a SEPERATE option to purchase agreement. Two documents define 2 distinctly different contracts.
If they stop paying rent , it’s a routine lease eviction.
Even if evicted they still have the option to purchase the property later at the agreed price.
I wold included a contingency in the option to make it null and void if the optionee has been evicted for non-payment, (RE contract performance failure) within the last 12 months from any property so you can wrtie another option free and clear.