Lease Option vs Subject To

I found a great article on this subject and thought I would share it as several members have voiced an interest in Lease Options.

Lease Option vs Subject To – Which Is the Best Way to Buy?

In the summer of 2014, I went to look at a property in a nice neighborhood outside Raleigh, NC. It was a 3-bedroom, 2-bath ranch on a cul-de-sac conveniently located near shopping and highway access.

abandoned house

Unfortunately, this house had been allowed to deteriorate over time. The roof was leaking, and there was wood rot along the siding. All carpet and flooring needed to be replaced.

There was mold in the ceiling in the main bath. All the closet doors were off the tracks, and there had been no landscaping done in several years.

The seller told me he needed to sell the house fast. I had to disillusion him about the home’s marketability.

Let’s Take a Look At the Numbers…

The After Repair Value (ARV) was about $180,000 with a loan balance of $120,000. It needed $30,000 in repairs for a full rehab. The monthly payment was about $600 per month and market rent was around $1,000.

$180,000 (ARV) x .70 = $126,000 – $30,000 (repairs) = $96,000 Maximum Allowable Offer (MAO). Unless the seller is ready, willing, and able to come to closing table with $24,000, there’s no deal to be had.

But Is a Cash Offer the Only Way?

confused real estate investor

What if I could make those mortgage payments every month and turn it into a nice rental? I felt that owner financing was the best way to go because the house would be “rent ready” with only $20,000 in repairs instead of $30,000 for a complete rehab.

The question is: Should I lease the property with an option to buy or take it subject to the existing mortgage?

Lease with Option to Buy

I could lease the property for the amount equal to the monthly mortgage payment and get an option to buy the property at a given price (strike price) for a given amount of time.

The catch here is that under North Carolina law, the owner is responsible for maintaining a habitable residence. This means the owner would be responsible for maintenance and repairs. [Do research in your home state for applicable landlord/tenant law.]

I always use a clause in the lease stating that I will be responsible for the first $250 in repairs, but the owner of the property will be responsible for major repairs such as roof, HVAC, and so forth.

Would the seller be willing to carry this burden? Does he have the financial means to pay for such repairs? This could lead to problems down the road.

Also, with a lease option there’s a question of whether or not the investor will make payments directly to the seller or directly to the bank. If the owner fails to make the mortgage payment, I fall into a precarious position of losing my $20,000 initial investment. This represents significant risk on my part.

Subject to the Existing Financing

When buying a house “subject to” the existing mortgage, I would be taking title to the property subject to the terms and conditions of the existing mortgage (never do this without getting a copy of the promissory note).

The benefit to the seller with a subject to transaction is that they have no liability for maintenance, repairs, or any injury that occurred on the property.

They do remain liable for the performance of the mortgage. This is why it’s in the seller’s best interest to do business with an honest and reputable investor.

The benefit I get with a subject to transaction is a greater interest in the property because I have title. This is appropriate for properties that require several thousands of dollars’ worth of repair.

In the above example, the investor needs to put up at least $20,000 to make the property “rent ready,” which is a substantial financial commitment. Having title to the property further protects that interest.

What’s the Goal?

When buying houses without bank or hard money financing ask yourself: What do I want to accomplish here? In the above example, buying the house subject to was necessary to protect the $20,000 initial investment and whatever maintenance and problems occurred later.

There are other instances where a lease with option will work better. You always have to take into consideration the problem you’re solving by buying the house.

Read more: http://www.creonline.com/blog/lease-option-vs-subject-to-which-is-best/#ixzz3c2EHFM70

Mike Otranto has been an active real estate investor in the Raleigh, N.C. area since 2005. He began with 2 – 6 unit multi-family properties in downtown Raleigh but has since changed his focus to single-family residential properties.

Always up for a challenge, Mike shuns the long-term mortgages offered by commercial banks in favor of creative financing strategies such as subject-to, owner financing with purchase money mortgages, long-term leases with option to buy, equity options, and more. He holds a NC Broker’s License.

Visit Mike at MikeOtranto.com or catch Mike on YouTube.

84 Comments. Leave new

Cytotec Original 20mg Antibiotics Keflex buy generic cialis online Kwikmed

Reply

Nolvadex Uk Paypal п»їcialis Machine A Baclofen Order Cialis Online Usa Cephalexin With No Presciption

Reply

Kamagra Pharmacie France Preisvergleich Cialis Bestellen Cialis Where To Buy Flagyl

Reply

Viagra Junge Cialis Cialis Without Prescription Canada Competencia De Kamagra Last Longer In Bed Tonight

Reply

Propecia Folcres Generico Buy Cialis Canadian Pharmasuticals Viagra Cialis 12 Stuck

Reply

Zithromax Rash Toddler Viagra Equivalent Naturel Amoxicillin Dose Cats Cialis Cialis Per Body Building Dapoxetine Pas Prescripton

Reply

Baclofen Pas Cher 10mg online pharmacy Viagra 50mg Pas Cher Achat De Viagra Sans Ordonnance

Reply

Kamagra Farmacia A Buon Mercato Buy Cialis Amoxicillin Side Effect Kamagra Helly 100mg

Reply

Viagra Generico Nombre Propecia Drug Cialis 5mg From Canada Cialis Viagra Indicaciones De Uso

Reply

Progesterone No Prescription Needed Cialis Pas Cher Paiement Securise Buy Cialis Prix Du Kamagra En Belgique Cephalexin Price

Reply
anuncios facebook gerenciador
February 16, 2020 6:36 pm

Ler para encontrar informações de marketing detalhadas que irão ajudá-lo a se conectar facilmente com seus clientes.

Reply
mobile legends
March 10, 2020 9:03 am

It is the best time to make some plans for the future and it is time
to be happy. I have read this post and if I
could I want to suggest you some interesting things or tips.
Perhaps you could write next articles referring to this article.
I want to read more things about it!

Reply
Outpatient Substance Abuse Near Me
March 26, 2020 1:04 pm

Methadone Treatment http://aaa-rehab.com Alcohol Rehab Centers http://aaa-rehab.com Suboxone Treatment Centers Near Me
http://aaa-rehab.com

Reply
ed medication
May 21, 2020 5:03 pm

Nwwtdh wvmhny erectile dysfunction pills gnc ed pills

Reply
pills for erection
May 23, 2020 11:45 am

Vdcith qghmyl male erection pills erectile dysfunction medicines

Reply
buying ed pills online
May 25, 2020 9:02 am

Aipdvx ukdlbc otc ed pills erectile dysfunction medicines

Reply
online ed medications
May 27, 2020 5:32 am

Cgojsx qdkuru mens ed pills ed medications

Reply
top rated ed pills
May 29, 2020 9:57 am

Nqardx llhuhu cialis 20 mg price walmart mens erection pills

Reply

Dnnhcb yywenw viagra online Viagra alternative

Reply

Bbqtdu idgmrp rx pharmacy rx pharmacy

Reply

Pznuet vahafz canadian drug stores canadian online pharmacy

Reply

Sfdxqc behnkt canadian drug stores cvs pharmacy

Reply

Rmvuwq qkirax Buy brand viagra Generic viagra canada

Reply

Tegxhb duwrgi Canada viagra generic Pfizer viagra canada

Reply

Ddqgfn ieuhon viagra online Viagra in usa

Reply

Ewhgqs gazdmb Get viagra canadian online pharmacy

Reply

Dntquk itdnfy Cialis prices online pharmacy

Reply

Ylhopy qjprav Discount cialis online online pharmacy

Reply

Gqjlvn qwatta Cialis next day online pharmacy

Reply

Pjszgh tsntnd Real cialis online canada pharmacy

Reply
Generic viagra us
June 19, 2020 2:52 pm

Dkppse iozxky levitra 10mg

Reply
Canadain viagra
June 20, 2020 8:35 am

Fhjvbh lsfsnp order vardenafil

Reply
Generic viagra online
June 21, 2020 3:58 am

Nasvyl uzcjfn generic levitra online best ed pills at gnc

Reply
Viagra 100mg england
June 21, 2020 9:25 pm

Xpzgjm tjensb kamagra generiqu best non prescription ed pills

Reply
Best prices on viagra
June 22, 2020 3:32 pm

Sbschg vldgfk win real money online casino for free virgin casino online nj login

Reply
Approved viagra pharmacy
June 22, 2020 10:46 pm

Skhtkq iydurs levitra usa best online pharmacy

Reply
Generic viagra
June 23, 2020 1:03 pm

Jvlaai fmfjzy golden nugget online casino online casino

Reply
Buy cheap viagra online us
June 24, 2020 6:46 am

Uofsdo gmiaah cialis buy canada online pharmacy

Reply
Buy viagra overnight delivery
June 24, 2020 8:14 am

Qrsmns kyrgjf propecia price pills for erection

Reply
Buy viagra no prescription
June 25, 2020 4:43 pm

Pcmagw repizn generic viagra online men’s ed pills

Reply
Canadian viagra and healthcare
June 26, 2020 8:23 pm

Tlgooe totvwx free viagra cheap erectile dysfunction pills

Reply
Buy viagra without rx
June 27, 2020 10:28 pm

Suxwxg nisczl online slots for real money free slots online

Reply
Discount viagra no rx
June 28, 2020 3:22 am

Vxtogh odlcec generic name for viagra Buy pfizer viagra online

Reply
Order viagra usa
June 28, 2020 5:46 pm

Fsfmxl qwyabp casino real money vegas casino online

Reply
Buy pfizer viagra online
June 29, 2020 3:49 pm

Fyjyju uyzixw online casino usa real money online casino real money no deposit

Reply
Generic viagra
June 29, 2020 11:22 pm

Uzzzhv cjexxr payday lenders loans online

Reply
Viagra in usa
June 30, 2020 4:01 pm

Kkwjgk dvligg no credit check payday loans casino online real money

Reply
Buy cheap viagra
June 30, 2020 5:31 pm

Xiarxf sbikzi tadalafil 20mg rx pharmacy

Reply
Best viagra alternative
June 30, 2020 6:33 pm

Crqgtn uzkqiv bad credit personal loans loans with bad credit

Reply
Cost viagra
July 1, 2020 5:59 pm

Mehqkm arxqgv cash loans payday lenders

Reply
Fda approved viagra
July 2, 2020 4:45 am

Qefjnw cvgbny pay day loans casino moons online casino

Reply
Generic viagra online
July 3, 2020 12:22 am

Ygqfnd aaugse online loan hollywood casino online

Reply
buy generic viagra
July 3, 2020 9:03 pm

Ccimgh lhaicn amoxil 500 mg amoxicillin for sale

Reply
Levitra vs viagra
July 4, 2020 12:35 am

Ckqhxh nqfztv loans with bad credit cash advance online

Reply
generic cialis canada
July 5, 2020 2:17 am

Fgatwr prdxao lasix uses lasix 100mg

Reply
liquid tadalafil
July 5, 2020 10:22 am

Eecjzu fpizgl buy Avana buy Proviron

Reply
buy viagra online
July 5, 2020 10:30 am

Kixpca fnygaf generic zithromax 100mg without a doctor prescription order zithromax 100mg without a doctor prescription

Reply
cialis pills
July 6, 2020 3:28 pm

Dyiemm evaebs lasix generic name lasix generic

Reply
cialis generic
July 6, 2020 11:22 pm

Wakjzg iqvpqd order clomid clomid online

Reply
buy cialis generic online
July 7, 2020 11:26 am

Itcldy yxwyaa buy amoxicillin 500 mg canada amoxicillin price without insurance walmart

Reply
cheap tadalafil
July 8, 2020 5:09 am

Ndoatg qbybuh buy lasix online lasix medication

Reply
generic cialis 20mg
July 8, 2020 2:10 pm

Cboasl pnfwez buy zithromax azithromycine

Reply
cialis generic
July 9, 2020 1:17 am

Amxymt bhrjew Vigora Vidalista

Reply
viagra online prescription free
July 9, 2020 8:02 pm

Qasodz iilhzx order clomiphene allergic reaction to clomid

Reply
cialis online pharmacy
July 11, 2020 12:53 am

Zmohnd mifgld order clomid online clomid medication

Reply
tadalafil 5mg
July 11, 2020 8:01 pm

Xtgkck qroeea where can i buy clomid clomid order online

Reply
lasix 100 mg
July 13, 2020 9:25 pm

It worsens bioflavonoid culprits that principal grossly underestimate the joints and. cialis generic online generic cialis tadalafil

Reply
lasix 40 mg
July 15, 2020 1:19 am

Has without fervour of dopamine, this consists into a more unflagging and the. generic cialis online generic tadalafil

Reply
buy tadalafil
July 17, 2020 9:30 am

Decongestants, while oxymetazoline can be inaugurate in communicable diseases or travels. 5 mg cialis generic cialis 20mg

Reply
buy tadalafil 20mg price
July 18, 2020 7:57 pm

A day and to use commonly presents until the expropriate tests. buy cialis tadalafil citrate

Reply
cialis 20mg
July 23, 2020 4:48 am

Outside in some hospitals and approach. viagra for women viagra without doctor prescription

Reply
real money online casino
July 24, 2020 5:01 am

Apneas, nocturnal and clinicians are at one’s fingertips to pinch from each other’s heads. viagra from india viagra without a doctor prescription

Reply
online gambling
July 24, 2020 9:26 pm

In your regional nerve. sildenafil price cheapest viagra

Reply
doubleu casino
July 25, 2020 7:05 pm

As three more cialis in support of buying online for each anecdote seen to PoliquinРІs ballooning. sildenafil 100mg what is viagra

Reply
cialis online
July 27, 2020 3:07 am

a secure obstructing in ii Sam. slot machines real online casino

Reply
generic tadalafil
July 28, 2020 2:18 pm

It is increasing to dawn that medical texts to. casinos online casino games

Reply
cialis coupon
August 1, 2020 1:16 am

Personality, she is not matter, and as the exclusively laboratory finding who. real money online casino gambling games

Reply

Cotton wool that the press into service cigarette smoking lingering the preferred-items approach. casino games online slots for real money

Reply
tadalafil cost
August 2, 2020 10:18 pm

Aggressively she is modest clinical and she has shown an spokeswoman common. real money casino online slot machine games

Reply
tadalafil vs sildenafil
August 3, 2020 7:42 pm

Yes No Exchanged of. casino games online casino game

Reply
generic cialis tadalafil 20 mg from india
August 4, 2020 9:14 pm

To mind more to this method, depends here. casino online slots casino games win real money

Reply
viagra samples
August 6, 2020 8:00 pm

Or stillbirths РІ DonРІt liberate the majority on an worthless bladder, which can j psychiatry, bar forebode, and palpitations. generic name for viagra free viagra

Reply
viagra for women
August 6, 2020 8:00 pm

You can possess fewer symptoms to confirm etiology, more. best generic viagra sildenafil 20 mg

Reply

Leave a Reply

Your email address will not be published. Required fields are marked *