In this episode, I’m answering some questions that I get pretty regularly from people doing lease options. This the 5th episode in a row that I’ve used for answering questions, which is a good thing… It’s a great way to get answers to questions you’ve been meaning to ask.
Alana is in my Facebook group, and her 1st question is about financing for tenant-buyers. She wants to be sure their assignment payment gets counted toward the down payment at the time of purchase.
It’s best to have the assignment payment made out to an escrow company. They will hold onto it and the tenant-buyer can then present the original check to the bank.
Use a local broker who’s willing to work with tenant-buyers to repair their credit over the few years they will be tenants. The buyers need to see the broker quarterly to report progress and get the next steps.
Conversely, you need to find tenant-buyers whose credit is repairable in the time they have before the buy option goes into effect. Sometimes you have to be tough with applicants that don’t qualify.
This doesn’t apply to sandwich lease options—only assignment arrangements. Alana also asks how to talk about the assignment payment.
My contracts don’t guarantee the assignment money will go to the down payment. Rather, the contract says the payment will be used to reduce the final cost of the house.
I generally set the sale price 2 to 3 years out at 5% more than the current sale price. If the market goes down, I’m not responsible for that. I save my comps so I can prove that my estimate was reasonable. Listen in as we discuss the details of these answers and more.
Listen and Learn:
- You can use a contract clause that protects the tenant-buyer if the appraisal doesn’t match the asking price.
- Once a month, send all your old leads a quick handwritten postcard.
- Alana put her first lease option deal on Airbnb and the cash flow is good.
- With sellers lacking motivation, you can fall back on “Maybe you should use a realtor to sell your home.”
Mentioned in this episode:
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