Hello all,
I am interested in doing the option to puchase and option to lease. how does the seller benefit if I lease it out to someone else? What are the benefits of having a tenant buyer when applying for my loan to refi the house? Or does that make any sense at all?
The seller benefits because his mortgage is being covered by the rent that is coming in every month. No small matter!
When you apply for a mortgage on any rental property, having a valid, existing lease agreement and tenant in place is a must. The lender wants to know their loan is going to be repaid. Seeing that rental income goes a long way towards making them happy.
??? ;D Thanks for your help. I get it, but what if the seller is selling his house. I found someone selling a house for ex. 100,000 it is worth 150,000. I want to get financed for the full amount of the appraisal value, buy the house from the guy, then lease option it to someone else. what info do I need to find out? Is that a type if strategy?
Your financing will be for the amount of the purchase price, not the appraisal value. So if the purchase price is $100K, and the appraisal is $150K, the lender will loan, at most, $100K, assuming you qualify for 100% financing.
Now, once you own the property you can then attempt to refi for a higher amount if you want to pull out cash.
And, sure, once you are the owner, setting it up as a Rent-to-Own with a tenant/buyer in place is a great exit strategy.
Cash out Refi may have some restirctions depending on which state you live in. In TX, you cannot refi more than 80% of your appraised value. So e.g your house appraised value is 150k x 0.80=120k. You also have to pay additional fees as well. You need to sit down and think about if it is feasible for you to do all this work for say 15k net…not to mention your APR may go up as well…
just my 2cents.
Great point Ronnie! This might not be worth his while, he might consider just buying and renting-to-own or just sell out right.
Driley
Nothing. They are different terms for the same thing.
Let’s say you were the seller and you put in a tenate buyer. Then they subleased the house and then they decided to pocket the money from the sublesor and not pay you you for a couple of months. How can you evict. The sublesor was doing what he was supposed too? How can you remedy the situation?
First, as the seller in any sanwich lease, we are too smart to allow a property of our’s to be sublet.
Second, as investors in a sandwich lease, we are too ethical and honest to ever put a homeowner in that position. We are legitimate business folks and act accordingly.
The situation you describe should never happen. However, I’m not so naive to say things don’t go wrong. And in the unlikely scenario you describe, the homeowner would need to avail himself of an attorney and begin the necessary legal action.
Yes, but if they are purchasing on a lease with option to buy don’t they automatically have the right to sublease the property?