Advantage Of L/o Over Sub2?

[Rich08 0]

In a sub2 you actually have the deed. So it is obvious what the advantage of sub2 is. But what is the advantage of doing lo over sub2?

 

Thanks

[Jonathan RexfordFL 8]

Deal Structuring. With a lease option you can actually have two parts for the transcation. How about a Roth IRA doing the Option and you do the lease.

[MichaelC 160]

Rich, each technique has its pros and cons. As you already noted, with a Sub To, you are taking title and ownership.

But, with a lease purchase deal we have less liablilty and more flexibility. If something goes wrong, (and it does occasionally), we are merely tenants. Breaking a lease is a heck of a lot less problematic than not being able to make the mortgage payments for a homeowner whose name still remains on that note. How quickly before you have a lawsuit in your lap?

In a L/P, we have no maintenance and repair responsibilities. In a Sub To, you're the owner, so you fix it.

I also think that a L/P is easier to put together. Not only because the paperwork is much less cumbersome, but because the degree of motivation required from a seller is much less, also.

My .02...

[bartendjoe 0]

Deal Structuring.  With a lease option you can actually have two parts for the transcation.  How about a Roth IRA doing the Option and you do the lease.

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That's an interesting idea. Do you know of a company that will allow you to purchase the option using your Roth IRA? The option fee is usually a very small in a SLO deal. I assume the profits from the sale would then go into the Roth IRA. Would this allow you to avoid taxes on the profits or would you pay taxes and put the difference in the Roth?

[Jonathan RexfordFL 8]

www.trustect.com does allow them. All profits from option goes to Roth Tax Free. Hence the reason for two agreements. One lease and One option.

 

 

Now of course the income from Lease will be taxed as ordinary income if it is paid to you or entity.