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Protecting yourself on a Lease Purchase deal
| | Monday, January 09, 2006 @ 10:38 AM EST
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Contributed by: Diana Fontanez
Diana Fontanez Properties
Read more archived articles about U Make The Call
There is nothing more important that will make or break your deal than a powerful contract and doing what it takes to be protected.
Lets go over the list of things you must do to protect yourself in a Lease Purchase. Because anything can go wrong and you MUST be prepared!
Credit check: You do not want any problem tenants in the property. Go back as far as you can with the prospective tentant/buyer. You want to protect yourself in the deal and avoid the tenant from trashing your place or worst yet, not pay at all. Check the credit of the landlord/seller.
Record a memoramdum: What happens if the seller tries to sell the property behind your back while you have a tenant who pays on time? By recording a memoramdum of option you will place a cloud on the title. Its inexpensive.
Title check: Contact your local title company. Do your homework!
Check the property: Have the prospective tenant/buyer inspect the property with you. Once satisfied, have him sign the property checklist.
Insurance: REQUIRE that the tenant/buyer haves renter's insurance.
Deed: Have the owner place the deed into escrow ASAP. One less thing to do when the tenant/buyer is ready to exercise his option to purchase. Don't forget to open escrow. It shows a paper trail of the interest in the property if anything happens.
Contract: THE MOST IMPORTANT OF ALL! I have 6 specific contracts that protect me in a deal. It depends on the deal that I am doing. Am I subletting the property? There is a contract for that. Am I cooperating with the seller/landord? Then a cooperative agreement is a must.
You must have powerful contracts to protect you. Make sure that you use 2 different contracts with a renter/buyer. One is the residential lease and the other is an option to purchase. If you try to evict them, you will do so by the residential lease breach. SEPARATE THEM!!!'
Deposit aka Option Money: Collect enough deposit from a tenant/buyer. The bigger the deposit (non refundable), the more money for you but also the bigger the interest of the tenant/buyer to protect that deposit, pay on time, and take care of the property. After all, he is going to purchase it! I suggest 4 to 6 months worth of rent or 2 to 5% of the purchase price.
There are many strategies and secrets I use to protect myself and sleep better at night knowing that I am protected.
Do the same thing and you will go to the bank with money you havent seen before!!!
To your success!
Diana Fontanez
Lease Purchase Specialist and Consultant
Word Cloud:
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