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Hart

Questions about lease option transactions

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I am working on getting my first deal (my goal is to do so by 3-31-13). Let me see if I can give an overview of how these deals work, then you correct me where I'm wrong, or point out how deals vary, depending on the investor, the circumstances, etc.

1. I find a seller who wants to rent-to-sell her home.

2. The seller signs a contract that gives me the right to market the home to a tenant-buyer.

a. Does this contract state that I will “lease” the property?

b. If I later assign to the tenant-buyer my right to lease-purchase the property, I cannot assign the buyer something I do not have. If I have the right to lease-purchase the property, then I can assign that to the buyer. If I do not have the right to lease-purchase the property, then I cannot assign that to the buyer.

c. Do you understand my confusion here?

3. I find the tenant buyer who is interested in the property and able to pay my consulting fee, which is also his down payment.

4. At some point, the tenant-buyer and the seller agree to specific terms of sale, like

a. Does the sale include the washer-dryer, the refrigerator, the flamingos and the plastic deer?

b. Does the seller negotiate with the tenant-buyer on all the specifics?

c. If the seller and the tenant-buyer do not agree, then I have to find another tenant-buyer, right?

d. If I draft the lease agreement and the sale agreement and the option contract, am I practicing law?

e. How do I avoid getting bogged down in the details? Do I just draft a seller-friendly agreement and tell the tenant-buyer, “Take it or leave it?” And if they leave it, hopefully, I have multiple tenant-buyers lined up to take their place.

5. I don’t recall seeing in MC’s contracts any contingency provisions where I get to bail if I can’t find a tenant-buyer within the option period.

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Of course, everything starts with finding a homeowner who is interested in what you are offering and then who wants to do business with you. That needs to be your focus right now. Concerns about tenant/buyers are valid, but if you try and know everything before you get started, you're never going to get started. Focus on what needs to be done today, and worry about next month, next month. You're overthinking the process, not at all uncommon, but definitely the death of doing.

 

Interesting quote from Seth Godin:

 

"The best way to get unstuck? Don't wait for the right answer and the golden path to present themselves. This is precisely why you're stuck. Starting without seeing the end is difficult, so we often wait until we see the end, scanning relentlessly for the right way, the best way and the perfect way. The way to get unstuck is to start down the wrong path, right now. Step by step, page by page, interaction by interaction. As you start moving, you can't help but improve, can't help but incrementally find yourself getting back toward your north star. You might not end up with perfect, but it's significantly more valuable than being stuck."

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In all fairness I have not yet received the naked investor manual yet because it's still in the mail.

But I have read the naked investor contracts. Can I get a little guidance as to what those contracts are obligating me, the sellers, and the buyers to do?

 

If I don't understand the fundamentals of the transaction then I don't know what I'm asking the seller to do or why they should want to do it.

 

 

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Rereading my reply above, in particular the quote of Seth Godin's, it comes off as unnecessarily harsh and dismissive of Hart's questions and concerns. So first, I apologize to Hart for that, and to anyone else who considers my reply to be inappropriate. After being live on the internet for about ten years, anyone who has spent even a brief amount of time here knows that this place has always been, first and foremost, the friendliest and most informative board of its type on the 'net. We check our egos at the door, we share and learn, and have some fun and laughs in the process. My post above doesn't meet those standards and so a self inflicted public flogging was in order. :blush:

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Seth has some great words....I think a number of which apply to anyone looking to start any business.....

I was about to write a ranting post about someone offering to buy me a cup of coffee..(in exchange for me to share 10 years of wisdom and business development education with him...) when I saw Seth talk about why he rejects offers from people to buy him lunch...

He was dead on.....and what he said mirrored my thoughts.....

I may create that post, then put a link on the NI for all to see.

 

(It irritates me when people essentially say they think what I have to offer is worth $5...."hey...I was thinking I could buy you a cup of coffee.." Really?!?!?!? WOW!!! I've never been able to buy a freaking cup of coffee!!! You mean I can spend an hour with you and share everything I've learned and acquired in 10 years and you'll buy me a cup of COFFEE!?!?!?!?!? HOLY F ING CRAP!!!!

SIGN ME UP!!!!!!

BTW-----I DONT DRINK COFFEE!!!!

I HATE THE SMELL OF IT!!!

I should record the next phone call of someone offering to buy me a cup of coffee so I can give them the keys to the kingdom......

Losers......

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BTW---that had nothing..NOTHING to do with HArt... I just went off on a tangent...

HART is awesome!!!!

I just went off on the whole Seth thing....totally unrelated to Hart...

I think I'll start a separate thread..."Coffee SUCKS!!"

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Hi Pilot, I've visited your site before and find that you have a unique business model set up.

 

So, how about you fly to Toronto, at your own expense, I will book a 5 star hotel for you, with your credit card number, and buy you a cup of famous Canadian Tim Horton's coffee? We will drink and laugh and share the wealth of real estate.

 

The beginning of a promising international business partnership.

 

 

edit: I just noticed that we've hijacked this post. Apologize and let's get back to the topic.

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That is funny Daniel!

 

Hey Hart...hopefully this will help..

For a CA (where you are assigning the LO)...

1) You work with a seller that is having some difficulty selling their house, or needs to move it quicker than an agent is having luck doing. You put the figures together adn present them to the seller, and adjust as needed to put the final figures in place. Option Price, Option Fee (what you are charging), Lease payments, and rent credits.

 

2) once the #'s are settled to, you draft the contracts which will be the lease and separate option to purchase and the assignment with the figures in place, and it will be between your company and the seller, and you have the right to assign.

 

3) Now you market the property and you find an assignee that needs to lease purchase a home, and you pull credit, approve them etc.

 

4) They pay you the option fee, and the first month's payment, and sign the assignment of agreement. You pay the owner the first month, and whatever, if any of the option fee you all agreed to.

 

5) You toss your cell phone away and get a new pre-paid phone with a new number.

 

6) rinse and repeat.

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Interesting quote from Seth Godin:

 

"The best way to get unstuck? Don't wait for the right answer and the golden path to present themselves. This is precisely why you're stuck. Starting without seeing the end is difficult, so we often wait until we see the end, scanning relentlessly for the right way, the best way and the perfect way. The way to get unstuck is to start down the wrong path, right now. Step by step, page by page, interaction by interaction. As you start moving, you can't help but improve, can't help but incrementally find yourself getting back toward your north star. You might not end up with perfect, but it's significantly more valuable than being stuck."

 

 

 

 

This quote has power for me coming from Seth Godin because, apart from being a thought leader in his field, he comes across as a really mild mannered guy, someone I could emulate.

 

Another thing I heard him say is to do things you fear doing. This is one of his top 3 (or so) principles as far as what he makes a priority.

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That is funny Daniel!

 

Hey Hart...hopefully this will help..

For a CA (where you are assigning the LO)...

1) You work with a seller that is having some difficulty selling their house, or needs to move it quicker than an agent is having luck doing. You put the figures together adn present them to the seller, and adjust as needed to put the final figures in place. Option Price, Option Fee (what you are charging), Lease payments, and rent credits.

 

2) once the #'s are settled to, you draft the contracts which will be the lease and separate option to purchase and the assignment with the figures in place, and it will be between your company and the seller, and you have the right to assign.

 

3) Now you market the property and you find an assignee that needs to lease purchase a home, and you pull credit, approve them etc.

 

4) They pay you the option fee, and the first month's payment, and sign the assignment of agreement. You pay the owner the first month, and whatever, if any of the option fee you all agreed to.

 

5) You toss your cell phone away and get a new pre-paid phone with a new number.

 

6) rinse and repeat.

 

This was helpful. Thanks.

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