MichaelC

Hi, Shar. What do you mean the option money has never been applied to the down payment? Where does it go then? I'm assuming a credit towards the purchase price, no?

Hmmm. . .you don't often have tenants offering to pay rent in advance. Sweet, but I guess the skeptic in me wonders why. . . Anyway, my paranoia aside, if the t/b wants to pay in advance, write up a simple receipt. And as for paying the homeowner, that really is up to you. You can pay as agreed, that is, monthly. Or you can pay the homeowner his share of six months rent in advance, for which you now become the greatest thing since canned beer. If you do go the pay in advance route, be sure to get a receipt, also.

Mike, I'm not sure I understand. You have a buyer for the deal? Or are you referring to a tenant/buyer who wants to prepay 6 months rent?

Wise words, Steve. Thanks for sharing your experiences.

Hi, Steve, and welcome to The Naked Investor. Back when this board started, around 2003, it was targeted at new investors, with an interest in lease options. I felt then and I feel now that they are still one of the best, if not the best strategy for the new kid on the block. As you know, done correctly they are safe, relatively easy to put to use, and have minimal out-of-pocket capital requirements. That said, that was the lure back in the day. Many of the original members here have gone on to other strategies as they grew as investors. Which is the logical development we all follow. Get good, then get big.

Wow. You've awakened a thread from 2009! I suppose you can always Paypal the homeowner the dollar.

You can try and figure out the precise amount via an amortization table; you can estimate the amount; or you can write in something along the lines of "Purchase price will be the balance of the mortgage at time of closing". Problem with that is that can be construed as an "illusory contract". Meaning, a key component is missing: the purchase price, in this instance. It can lead to legal hassles down the road should someone try and get cute. It's unlikey, Mike, but be aware that the possibility exists and when it comes to money some people can be jerks. Curious: what is the current balance? Have you confirmed the amount owed and also if any other liens exist? And what is a conservative and realistic value of the property today?

Yeah, pros and cons, Mike. Pros and cons when you do these sandwich type deals. More profit potential but also additional downside risk, such as a vacancy. As you noted, the contract gives you a legal out with minimal damages to your pocket. While using that weasel clause isn't out intent when doing these deals, as you can see it's there for a reason. Short of marketing as you already seem to be doing, and short of talking to the homeowner and negotiating new terms, there isn't much else you can do to alleviate the situation you find yourself facing.

Is it even a deal, you ask. Potentially, yes. But you need to know the values of the properties individually. That's your starting point. Followed by financing possibilities offered by the seller and from outside sources, if you need to go in that direction. With this in mind, find an Agent friend who can run some numbers for you.

Yes, it's possible to do a multiple property deal. But there are some questions for you to consider. For starters, the value of the properties individually, and then as a whole package. You said he wants $100K down and then the owner will carry the balance. At what terms? Will he take a discount for an all cash deal? Once you have the properties, what is the exit strategy? What's the plan?

And this one had more twists and curves than usual. The next ones will seem like a walk in the park.

That's great news, Mike! I'm happy as can be for you. I know you worked hard for this, saw it through to the end, and now can enjoy the fruits of your labor. Learn from it, rewind, and do it again. It can only get easier. . .right?!

Marketing is your key. Be aggressive. It takes one interested party and the deal is done, Mike.

This Commission on Demand could be a state thing, a county thing, a title company thing, or an attorney thing. You're not getting a commission, you're receiving an assignment fee. It'll all work out in the end.

I'm not familiar with a Commission on Demand form, since I am not a Realtor and never receive a commission when doing a deal. This may be something specific to California, (although I think I would have heard of this previously), or it may be specific to the way the attorney involved wants this done. As you said, follow up on Monday and stay on top of this with you eye on the prize: getting paid and putting this one in the Done column.

The attorneys aren't there to negotiate the terms. They are present to push the paperwork through, dot the i's and cross the t's.

This is a sandwich lease, I assume? Then you are on the hook for making that payment unless your agreement states otherwise. There is always a risk vs reward aspect to all these deals, Mike. More potential money when doing a sandwich lease, but the risk also increases. You noted lots of attention but no takers. Have you followed up with these folks and asked why? Is the price wrong? The rent too high? It doesn't sound like a marketing issue as much as it is a numbers issue.

Huh? That doesn't make sense. If there isn't a specific law that addresses this, how is the issue enforced? Ahh, I get it. This is one of those "grey areas" that attorneys use to keep the meter running and pad their billable hours. Either that, or this attorney has an office in the back of one of California's medical marijuana dispensaries and she's suffering from a contact high.

I'm all in for Trump. Like many voters, I am exhausted by the same old crap that comes out of Washington. The fact that the establishment is so fearful of a Trump nomination tells me he is on to something. It's time for term limits, for starters. The concept of serving the people that vote for you is long gone with these fat cats. I mean, 30 years a senator or congressman? Serve a 4 year term and get the hell out. If you can't make a difference in that time you never will. It's going to be a fun few months to watch how all this plays out. Unfortunately for Trump, he has the odds stacked against him. The media is in the tank for Hill & Bill, and the Clinton machine is well financed and dirty.

Yes, any seller would prefer a non-exclusive option to purchase agreement. You can try for something more secure, such as that exclusive option, but that may cause the seller to refuse the deal. So you are left to trusting the other parties you are dealing with. I don't know of any way to guarantee 100% that someone won't try to screw you over. Trust your judgement and your instincts and do your best to stay on top of things. Over two decades in this biz, it's been but a few rare times that someone has screwed me over. Not enough to scare me away, but enough to keep me on my toes.

You're rounding the final turn, Mike, heading towards the finish line. . .

Yes, you are on the right track. The attorney's job here is to guide the deal through to its desired conclusion: the transfer of title, and funds distributed as described. As I write this it is Saturday morning, so I have to assume you won't hear anything until Monday.

Makes perfect sense, Mike. And not to worry because from the looks of things your buyer seems legit and ready to roll. So in the meantime, get an assignment agreement signed and collect the $5K. Drinks to follow. . .

As I mentioned above, for the time being you can use an assignment agreement between you and your buyer until the attorney gets back to you.

The Pure Option agreement specifies that you have the right to assign or sell your interest in the property to a third party. I'm not the last word regarding California real estate laws, but I can't believe that assigning an option agreement can be deemed illegal, even in a state as over regulated as CA. If it turns out it is, a good lawyer will find a way around it, possibly even bringing in a licensed Broker to make the deal official. It'll go down, Mike, but you may have a few extra hurdles to jump. Keep us posted.