CONTRACT CLAUSES

[Guest Tommy]

do these contracts sold through NAKED INVESTOR FOR 97.00 DOLLARS have all the nessessary clauses like the

 

QUALIFIED RESIDENT CLAUSE? subject to finding a qualified resident to occupy the property?

 

and

EQUITY CLAUSE? clause that lets you tap into the equity when buying the house on a lease option?

for example you buy a 100,000 house subject too and the owner owes 75,000 buy the time you excersize your option you have paid down 5000 for example. Do the contracts alow you to tap into the equity that you paid down?

 

THANKS TOMMY

[MichaelC 160]

do these contracts sold through NAKED INVESTOR FOR 97.00 DOLLARS have all the nessessary clauses like the

 

QUALIFIED RESIDENT CLAUSE? subject to finding a qualified resident to occupy the property?

Yes. The agreement between the investor and the homeowner/seller contains not only a clause that allows you to cancel the deal before you are liable to make any payments to the seller, it also has a clause that allows you an out during the agreement.

EQUITY CLAUSE? clause that lets you tap into the equity when buying the house on a lease option?

for example you buy a 100,000 house subject too and the owner owes 75,000 buy the time you excersize your option you have paid down 5000 for example. Do the contracts alow you to tap into the equity that you paid down?

I'm not clear on your example, Tommy. If you bought the house Subject To, there won't be any option to exercise in the deal. Can you clarify this for me?

[R/E Possibilities 0]

Michael what he is referring to is something I have read in another rent-to-own book I read...paydown.

 

An additional stream of income for a lease option investor (us) is the amount of money the loan is paid down during the lease option period. Over the one to four year lease option period the loan principle could be paid down several thousand dollars. There is some verbage you can put in the contract where we (the middleman/investor) would get to keep this paydown.

 

Basically we would offer the homeowner a set amount of money when the house is sold. That way the paydown on the loan would go to us.

 

Ed

[MichaelC 160]

Thanks, Tommy, er, Ed . If I understand what you are saying, this type of deal would allow us to purchase the price at the payoff amount if and when we exercised our option. Is this correct?

Sure, this can be stated in an agreeement between yourself and the homeowner. Although, it isn't the approach I take. My preference is to simplify the deal and not confuse the seller with concepts like paydowns and equity sharing.

[Guest Guest_joseph44]

Hi everybody,

I agree with Michael C keep it simple and to the point,if

you try and get fancy you more than likely will loose a potential client.

[dreamer 0]

HI Everybody:

I'm a newbie and still doing my dd on lease purchasing (anxiously awaiting the arrival of Michael's manual!!).

 

Conti and Finkel recommend structuring a contract this way so the investor benefits from the loan amortization(so much so that they say it is permanently printed in their contracts). They say to specify the amount of equity that will be due the seller should you exercise the option to purchase the property.

 

a scenario;

36 month term

Option price- $100,000

Outstanding principal on mortgage at the time you sign the deal- $50,000

Seller equity at deal inception= $50,000

 

The contract between seller and investor would specify the equity payoff (amount due seller) at the time the option is exercised. In this example it would be $50,000. The contract would specify this amount ($50,000) being the "full payment for seller's equity". If the contract is done in this manner, the investor will pocket whatever paydown of the mortgage occured in between the contract inception and the time of the option exercise.

[MichaelC 160]

Hi, Dreamer, and welcome to The Naked Investor.

The approach you describe is but one way to structure these deals. And therein lies one of the many advantages of a knowledgeable lease purchase transaction. There are many numbers, scenarios, and approaches you can take to satisfy the needs of the homeowner while at the same time cutting a sweet deal for yourself. And that's the way it should be.

Personally, I think that approach you talk about confuses the issue for many sellers. My preference is to reach an agreement on the final purchase price from the get go. As I've said before, it's cleaner and less confusing for the seller. This, in turn, diminishes the likelihood of hearing, "I want to run this by my attorney." The bottom line is more deals get done when you keep deals simple.

Keep in mind this is my approach and my reasons for it. I won't hate anyone who wants to tweak this method to better suit themselves. That what this board is for.

[dreamer 0]

Michael:

 

I like the keeping it simple approach as well.

 

I'm not thrilled with this approach unless you are upfront with the seller about it. It's like a little hidden something that could take advantage of an unknowing seller who might not be a savvy as the investor.

 

Then again I could be a naive newbie :-)