I have bought and sold many properties using lease options since 1979. However, a land trust has many advantages over a leade option.
Example: The buyer (lessee) can legally write off the mortgage interest and property taxes in a trust transaction, and shares future appreciation in all my transactions. Can you say that for the buyer is a lease option?
My transactions are three years and at the end, the Buyer is able to REFINANCE the property. An optionee in a lease option cannot.
The Buyer is my transactions has all the benefits of home ownership the day he/she moves in. Not in a lease option.
In a lease option if the buyer is in default, you may well have to foreclose rather than evict if he is successful in claiming an equitable interest in the property. With a trust it’s a simple eviction – period. Reason: a land trust is personal property and the buyer’s interest is in the trust, not the property.
Unless you pay a collection service, you must collect the rent payments and handle all property management yourself in an option transaction. My trustee does it for me. He collects the rent, pays the mortgage payments and sends me a check each month for my positive cash flow.
Maintenance and repairs? In a lease option you HOPE your tenant takes good care of the property and are still responsible for the costs. In a trust transaction, it is the Tenant’s responsibility for maintenance and repairs, not yours, and my experience has been they take great pride in doing so.
I could go on and on, but the point is that I am not dissing lease options. They are legal (although they do violate the DOSC) and Texas is doing all it can to discourage them. They are a means of achieving a goal. In my opinion, they are just not the best or safest way to do it.
The trust is safer and more efficient and brings better financial results. I didn’t intend to scare anyone, just inform them that there are much better and safer ways to sell or buy a property.
As to approaching the seller, I simply TELL them that if they are willing to stay on the loan for 3 years and keep most of their equity intact, I will take over responsibility for mortgage payments, maintenance and repairs, property taxes, management, etc. on a three year triple-net lease. I tell them they will not be at risk and that I will cash them out in three years BEFORE they ever have to transfer title. Works for me.
I’d be happy to walk anyone through a transaction and share all profits 50/50 with my birddogs. Peace.