After trying the landlord route for a year, I want to sell. Too much maintenance and risk given I have moved 2 time-zones away. I have a L/O deal on the table and have not seen one before. The Lesee , a contractor, claims that he needs a 5 year deal to clean up his credit and put himself in a position to buy. The strike price is only about 10% higher than my best estimate of current fmv. He also has a clause in the contract that allows him to assign the lease to another party if he needs a replacement. I get $10K deposit and above market rent, and no more maintenance issues. But giving up any potential appreciation over the next five years while I carry the note seems crazy. Is this as one sided a deal as it seems to me? Thanks for your thoughts!
You better believe it’s a one way street! No one, and I mean no one, needs five years to clean up their credit. This guy is a shark taking you for a piece of bait. As an investor, I would love to be able to lock up five year deals like this guy is trying to do. In fact, I have done a few with some desperate homeowners in the past and they have always been a great deal. . .for me.
As an owner, though, I would never offer up a five year Rent to Own term. I’d be leaving too much on the table. Instead, offer him 12 months, maybe 24 at most, and then you can always negotiate new terms if the option isn’t exercised during that time. This way the new terms reflect current market conditions.
I agree with AJ,
Anybody with credit problems can usually clear up enough to qualify for a mortgage within a year or so… especially with all the products out there like subprime. Remember, that mortgage will be on your credit for 5 years and only then the buyer MAY excersize the option to buy. They are probably betting on appreciation or will be assigning their end to someone else and making a nice cash flow for doing nothing for the next 60 months…
He is playing you brother. Don’t fall for that motivated seller stuff, and stand on your grounds. Make it a win for everyone and if he doesn’t like it there’s plenty out there to work with. Good luck and God Bless