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I am trying to make a deal on a house that has an underlying loan on it with a due on sale clause. I’ve read in some of Jack Miller’s writings that you can secure an option with a mortgage. I also know that you cant lease a property for longer than 3 years at a time with a due on sale clause. We are going to agree that I lease the property from him for just under what I collect (not much cash flow). If I option the property at $60,000 for 5-10 years and the property has a current full retail value of about $90,000 with some minor repairs to be made during the lease period. Part of my option consideration is as a master tenant and getting tenants who can qualify for USDA / FHA financing. My question is do I secure this option with a $30,000 mortgage recorded against the property with no payments and no interest but is due on sale? If this is how I do it am I subject to any Dodd Frank laws. Please help. Even if this deal doesn’t work out I need to know for any future situations like this.
Randall,
Sorry I am confused on your deal. Could you explain it to me again in a different fashion. What is going to be your option purchase price? When will you have to exercise that option? Is it 5 years or 10 years big difference. It sounds like you are going to do a master lease on the property also is that correct? What is the rent payment to the owner and what is the rent payment coming to you? Who is taking care of the maintenance and repairs?
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