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I have ?sold?/rented a house on a lease/option, and it works really well because you get lots of interested tenants, and you can get above market rents to help it cash flow better, and hopefully they’ll take better care of the house.
However, I have not bought on a lease/option, so I have a question on that side. I know that when I buy I would like the option to be for as long as I can get it for. However, for the lease, what kind of language should I put in to protect me in case I have trouble selling or renting the house to cover the lease payments? I?m pretty sure that I can make it cash flow, but in this market it would be good to have an escape clause just in case market rents go down. I don’t want to get stuck in a lease that causes me a negative cash flow long term. What do you do for this? Thanks.
– danDaniel,
Instead of signing up for a 30 year lease or even 5 years, it might be better to do one year with the right to renew for another then another then another. then at the end of the lease, you can make the decision to pass or play.
Same with the option — since there is uncertainty in the market, get an option for 3 – 4 – 5 years down the road but also get the right to extend for another year then another year – maybe with a small option fee.
to avoid the problem all together — just get an option for a lease and an option for an option. give yourself 30 days or 60 days to find a tenant where the property will cashflow and you can sell for more than your option price. If you can’t find anyone, then you can walk away. ( see how I did this in the experiment in creative real estate)
Jackie
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