Im trying to lease-to-own my house and im looking for advice

[wirednuts]

ill keep it simple. ok i wont

i remodeled a house, and i met people interested in buying it. i told them $55k cash out, and they asked if they could lease to own.

i agreed i would try it, as i am very much in need to get some money flowing back to me on this property. problem is, i dont know how lease to owns work in detail, and the buyer apparently does (he remodels houses for a living. he likes what ive done and is helping me finish)

so, i think he wants me to take some money off the down payment for helping me, and im fine with that (im guessing he means security deposit? if he helps, i would be willing to negate that fee). or do most lease to owns not have security deposits?

also, since i offered $55k cash out for this house, should the lease-to-own price be higher? i was thinking $60k? also, if they agreed to straight rent for $700 a month, would the lease-to-own montly rent price be lower? and then they pay the premium on top of that, i have no idea how much that might be.

he told me well go to the credit place and work out all the details, but ive been doing research and it seems these can be worked in a lot of different ways. does anyone know how they generally go? given the details i have, and say we sign a 3 year lease, what would monthly payments be?

btw, the house is just in a bad market area, but these people already live a mile down the road and are set here so it works out.

[Puppies04]

I think you need to have a chat with him asap, ask him exactly what kind of deal he is looking for then go see the bank.

[sm625]

My parents bought their house on a land contract. It seemed simple at the time, but then again it is simple when they keep making payments. The problems come when they start missing payments.

[wirednuts]

well these people have 3 kids and the only reason theyre looking is because their landlord couldnt pay the mortgage on their property they were renting. i dont actually have proof that is true, but i do know what these guys do for a living and nothing has made me think money is an issue for them. i even think they probably do have the means to buy the house outright, but a lease to own give them an out if they find the house isnt worth it after 6 months or so.

hes coming over today to help me finish the work that needs to be done. well debate the final sale price and monthly payments. i think i have a pretty good idea now how this works, but i agree the problems will be if they dont pay or bail out... but from what i can tell those situations usually benefit the seller.

[A5]

You should probably consult an attorney that specializes in real estate. If nothing else, you need a contract that says what you can do if he misses a payment, etc. You may also want to ask to see a current credit report. Just because you don't have any reason to think money is an issue doesn't mean that it isn't.

It seems like you're entering a complicated financial arrangement that you don't completely understand with someone who does understand it. Make sure you don't get ripped off - at a minimum try to find out what comparable houses sell for in your area.

[wirednuts]

thanks. its hard to compare this house to others, cause the outside still needs work but the inside is almost fully remodeled. ive been doing alot of research, and i think the reason the buyer wants to rent-to-own is to give himself an out if he finds the roof fallin in or something.... which it wont!

[wirednuts]

well i feel better now about the sale, we agreed on most of the terms. i gave him a good deal, and he agreed that i should just draw up the agreement on legal zoom how i want and he will sign it if he wants.

they were over for a few hours today, i told them just about everything i could think of about the house. i left no surprises and they are ok with the problems. im not going to get quite what i want for it, but still enough to pay my debts and at this point thats all i want.

so im off to legalzoom... hopefully not all night but probably

edit- well that was all night. legal zoom sucks. they do very basic stuff, it wasnt worth it in my case.

rocketlawyer is MUCH better. more comprehensive and better explanations of what you might need. its only $20 more then legalzooms crap too.

i made up like a 8 page lease that includes pretty much everything you could want. they leave a nice section to just write whatever the hell you want in too, so you can completely cover yourself.

i ended up keeping the rules simple though. $700 a month for 24 months, and they can buy it for $55k at any time during that period. All upgrades they do will be on their own expense, and after the 24 month period if they dont buy the house i assume full value for the upgraded property. and after 24 months, its up to me if they can stay renting the house but rent goes up 8%. and its up to me at that point if i still want to sell to them, and at what price. i only charged a $200 security deposit, thats to cover the legal fees and my time. ill put it towards the final purchase if they do end up buying.

so all in all, i think were set. move in day is really any day, but the set lease start is 9/1. im freakin excited, i really hope these guys buy it!