Options with property

Hey Everyone-
I am new to the landlord experience and I’m wondering about any suggestions that anyone may have, here’s my scenario.>>
I just built a new house (I will close on it Apr. 5th) and I’m total into it $216,000. I can sell it right now for $240,000 BUT, if I can hold it out until the end of the year,I’m confident can sell for near 280,000. That said, I can rent it for $1400-$1500 mo. breaking even at $1475. I realize the cashflow is lacking in this equation, but I feel the appreciation is worth the wait.
I have thought about doing a straight lease, or possibly a lease option. I’m not sure on the different approaches to these two options, (as far as down payments, security, etc.)
ANY feedback would be greatly appreciated.
Thanks, Justin

Just bear in mind first if you try to sell it less than a year of ownership could mean a higher tax implications on your part (consult with your tax advisor for more details). Remember you make money in real estate when you buy it today and you can sell it tomorrow for a lot more than what you paid for.

What you’re thinking for the price you could sell for by the end of the end is hypothetical. Doing a lease option could be good too since renter who are potential owner will take care of the home they’re living in.

I don’t recommed a lease option. Your tenant can claim an equitable interest in the property and in the event of default, you would be forced to foreclose (which can be expensive) rather than evict. I would place the property in a land trust and name my trustee. Then, here is what I tell my prospective tenant:


"I own a home in a land trust. I need someone to live in the property, make the payments on time, and be responsible for maintenance and repairs on a 3-year, triple net lease. I want you to treat this house with love – as if it were your own. I ask for no down payment – you will only pay closing costs, plus 3 months lease payments in advance. There will be no bank or credit qualifying. If you agree to this and keep your end of the bargain, I’ll give you the house.

How? When you sign the lease and pay the closing costs and advance lease payments, I will immediately assign you a Beneficiary interest in my trust.

You will (although only leasing) acquire IMMEDIATE home ownership benefits and are allowed by the IRS to write off the monthly mortgage interest payments and property taxes. You will also share in the future appreciation of the home on a 50/50 basis. At the end of three years, if you want to buy the property, you can do so at Fair Market Value. If you choose not to, there is no obligation or penalty."


Set your Mutually Agreed Value with your Tenant at $260K. Because you are providing your tenant with homeownership benefits, you can charge a much higher rent. In this case, you can get $1650 per month. which will provide you a $135 per mo positive cash flow including your trustee fee. In 3 years, your tenant buys you out at FMV and you splite everything over $260K on a 50/50 basis.


He is effectively buying a house on a seller-carry…100% percent of it. He gets:
100% of the property;
100% of the income tax write-off;
100% of the use, occupancy and possession;
100% of any water and/or mineral rights that go with the property;
100% of the right to refinance in his own name at the termination of the agreement;
100% of all the asset protection the trust provides;
100% of all of his down payment made by someone else;
100% of his credit qualifying done by someone else;
100% of the right to ALL the benefits of Fee Simple Real Estate ownership without credit qualifying or the standard up-front cash.

The only thing he is not getting is the equity the non-resident Beneficiary(s) - YOU - have at inception and 50% of the future appreciation potential.

I combine my land trust with a triple net lease and an equity share. Don’t look at “Equity Share” as owning only part of something: your tenant will own it all, and just agree that in exchange for his good fortune in being able to acquire a home, he’ll happily share some of the future appreciation with his Benefactor (YOU) …but only if there is ever to be any.

Should your tenant ever default, it is a simple eviction. Also, you are solidly protected and shielded from actions associated with any party’s: past bankruptcy; creditor claims; civil judgments; litigation in marital dissolution; probate actions, even state and federal income tax liens. Best of luck whatever you choose to do.

Da Wiz