I’m trying to get into lease-to-own options. I’m looking to be the “matchmaker” between motivated sellers and hungry tenant-buyers. I have a couple of questions regarding covering my butt in writing up a lease-to-own deal. Obviously a background and credit check should happen on any prospective tenants. Beyond that, if the tenants turn flaky & miss payments, I don’t want to cause the owner problems if I don’t have enough cash to cover the payments. What is the best way to protect myself and the owner of the property? I’m thinking there are a couple of scenarios here:
Pad the lease option fee enough to protect myself against a few months of missed payments
Pad the fee enough to discourage bad tenants
I have a couple of hungry tenant-buyers ready to move forward who I know and are trustworthy with good credit, but I’m concerned about others down the road who are not so responsible. This will be my first “real deal” if it goes through. Any thoughts or comments are appreciated.
Keep in mind that no matter what you do there isn’t a guarantee that all will go according to plan. One of the things you must consider is your ability to live up to your responsibilities in any deal you enter. Without experience or cash reserves, the sandwich lease you describe might not be in your best interests just yet. Have you considered an assignment or cooperative assignment instead?
What’s the price of the property? What is the status of the local real estate market? How much were you expecting to receive in option money?
If you have tenant/buyers, there are plenty of investors who will either pay you upfront cash for the referral, or partner with you. Your fingers are in a pot of gold. Don’t blow it. Good luck.
The more money you get as option consideration, the better! The more money the tenant/buyer has into the deal, the harder it is for them to default, not that they won’t, plus you have that money as a cushion. Of course always make sure the deal makes sense, don’t get into a deal just to say that you are doing a deal.