One complaint I've often heard from people who are landlords is the constant dealings with tenants; leaky sinks, toilets, calls in the middle of the night, etc. What are your experiences with people who "buy" on a lease option? Does this sort of arrangement usually attract a person with more of a homeowners mentality? Or are you still dealing with renters?
That's a fantastic question...
* You get less money from a tenant/buyer.
* Same liability, once a lien is filed by the tenant/buyer, in the event of default and repossession.
* Pretty much the same as foreclosing, if the tenant/buyer isn't cooperative.
* Tenant thinks you should pay for repairs, despite limits outlined in agreement.
* If A/C goes out, and you won't offer to repair it, tenant will likely bail, and you'll end up fixing it anyway.
* Sure, you're apt to get another 2 or 3 percent as option consideration, but that's just lost money.
* Good lease/options are just thinly disguised extra long escrow periods (or a time to allow a tenant/buyer time to demonstrate ability to pay on time, before morphing the deal into a full-on installment note, say after a year.
Seller Financing (installment note)
* You get more down from 'financed' buyers.
* Same liability, if defaulted buyer is uncooperative, and records a valid lien.
* Buyer has done his due diligence, does not expect seller to fix toilets or repair the AC.
All that said, our leases and options are mutually dependent on each other, and we do not allow liens to be recorded.
We also have an honest reputation.
Part of the option consideration is dependent on the tenant/buyer assuming liability for all repairs. If he doesn't want to do the repairs, he can immediately terminate the lease, and extinguish the option, and move out without further liability.
However, if the tenant/buyer defaults on the lease, his option is also extinguished, and he theoretically moves out without a legal fight.
In the event tenant/buyer becomes a sniveling jackass, we go for broke, and break his credit.
We sue him for unlawful detainer; get a judgment for rent and possession; put him to collection; and ultimately attempt to force him into bankruptcy, if at all possible. After the derogatory credit entries pile up, he'll have a difficult time renting a rake.
Of course, this is the same procedure we use on obstreperous, defaulted buyers, who believe that squatting in our house, without paying, 'is' an alternative for them. Nope.
Of course ....that would be the worst, dignity-stripping-scenario we could inflict on a customer, and fairly reflects our own professional incompetence, in dealing with default victims.
I mean, getting all personal and emotional, and escalating the situation, just reeks of 'amateurism' on our part.
Buyers are naturally that way, and beg for drama and trauma. We cannot indulge in that. It's too expensive and stupid.
So, we might outline what we plan to do to the deadbeats, and give them a chance to "get rid of us," with a cash offer to move out by ...say Friday. No strings attached.
This works for any deadbeat in training, whether renting or buying.
Meantime, the mentality of either a defaulted, tenant/buyer, or a financed buyer, can be the same, when they feel like they're backed into a corner.
So, a much wiser approach, is to offer the victim a more dignity-redeeming, if not more profitable exit, then what our contract agreements might stipulate.
So, that's my discourse on the mentalities of the damned.