Breaking Down a Lease Option | Deal Rescue

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  • Опубліковано 2 чер 2024
  • In the fifth part of this series, Pace Morby calls Victoria, the real estate agent, after his conversation with the lender/loan officer about structuring a lease option to satisfy the underwriter for this deal. Pace teaches her what a lease option is and how it will convert into a subject to transaction. He also explains how structuring the deal through a lease option will be easier for the underwriter since lease options are commonly understood in the real estate realm.
    This video is a great lesson on why educating each party in a creative finance deal is the smartest practice because of the numerous moving parts. A deal could easily be shut down if one party doesn’t understand something. Pace stresses that it’s best to ask questions about what the underwriter wants to see before proceeding with writing documents because every underwriter is different!
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    Chapters:
    0:00 - Intro
    1:38 - Lease Option
    4:40 - Different Parts of a Lease Option
    6:18 - Overcoming Underwriters
    10:40 - After the Call
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КОМЕНТАРІ • 23

  • @Mark.Monroe
    @Mark.Monroe Місяць тому +9

    Been doing this strategy for over 20 years. Did Kevin Choe first deal using this strategy 3-4:years ago. I even do cash out refi for the seller to use cash to purchase their next property

    • @ampthegamergod2223
      @ampthegamergod2223 Місяць тому +1

      What does that mean? You refinance the home and give the seller a portion of it back to keep?

    • @MichaelFoster-gh3xd
      @MichaelFoster-gh3xd Місяць тому +2

      ​@@ampthegamergod2223using equity in the house as down payment

    • @PaceMorby
      @PaceMorby  Місяць тому +1

      Amazing man!

    • @Mark.Monroe
      @Mark.Monroe Місяць тому

      ​@@ampthegamergod2223if the seller needs cash to buy their next house. I've had the seller pull cash out of the house in a form of refinance or a second lien, just need to make sure your monthly cash flow works

    • @REIwAlexY
      @REIwAlexY Місяць тому

      Can you explain a bit/give an example of the cash out refi situation? Haven't heard of that strategy yet

  • @richardweidner1625
    @richardweidner1625 Місяць тому +1

    genius at work

    • @PaceMorby
      @PaceMorby  Місяць тому

      Thank you, thank you very much

  • @brady167
    @brady167 Місяць тому

    beautiful explanation. Thank you.

    • @PaceMorby
      @PaceMorby  Місяць тому

      Glad it was helpful!

  • @dr.jasonbaca
    @dr.jasonbaca Місяць тому +1

    Brilliant, Pace! 🧐 ... We actually are doing this with a deal we're negotiating right now ... Question though 🤔 ... How do you handle the time between signing the Lease-Option (and making payments) and the time the seller actually moves out of their house (considering they aren't able to move out until their new loan gets approved and they buy their new place)?

    • @REIwAlexY
      @REIwAlexY Місяць тому +3

      hey there, I'm in pace's awesome subto group so let me share what I know.
      once lease option is drafted to suit underwriter's needs, quickly signed, 2-3 months payments for lease sent upfront within likely 24-48 hours. You then show underwriter proof of paid funds and then underwriter can approve for loan. this process is very fast if everyone is doing what they should. then, after new mortgage is approved, option is initiated and converted back into nice subto

    • @dr.jasonbaca
      @dr.jasonbaca Місяць тому

      @@REIwAlexY Hi Alex! Okay gotcha. So what about that "in between time"? The time between you executing your option to buy the house, and the time they actually move out of the house and it's yours to do something with? (Because even if they get approved for the loan, it's going to take time to find a new house to move into, or at the very least, close on one they like and move everything over to the new place, right?)

    • @REIwAlexY
      @REIwAlexY Місяць тому +1

      @@dr.jasonbaca ah I gotcha. Well there are a few possible solutions.
      The best case scenario (like shown in this video I believe) is the seller already has a house they are purchasing. So there would essentially be little to no down time.
      But in the case there isn't a home already picked out, the most common is people move stuff into storage and then get a temporary place like a short/mid term rental or with family as they now don't have to worry about mortgage and have down payment/upfront payments made to utilize.
      And the thing to keep in mind is that all the money you are paying them during the lease part is money that will decrease your option price when they finally do move. So all your "expenses" during the lease period are actually just increased down payment essentially towards the option price.
      Does that make more sense now?

    • @dr.jasonbaca
      @dr.jasonbaca Місяць тому

      @@REIwAlexY Hmm, okay, yeah that makes a lot of sense ... I know investors who are really big on NEVER closing on a house while the person is still in it ... And others who NEVER give them money (even in the form of a lease) until you have the deed/keys ... So I'm just trying to picture this scenario in my head to see how risky it seems to close while they are still in there or to be spending money before you actually have ownership of the house. :) But your answer has been very helpful, Alex!

  • @winstonjohnson8405
    @winstonjohnson8405 Місяць тому

    Talk to me about doing this in Texas please! (I know it's not legal, but it's a way to still legally get it done) Thanks

    • @REIwAlexY
      @REIwAlexY Місяць тому +4

      hey there, I'm in pace's awesome subto group so let me share what I know.
      this idea IS legal in ALL states. the only difference is the exact name and type of documents needed. for your specific example of Texas, this would be called an executory contract instead of lease option but its basically same thing.

    • @Mark.Monroe
      @Mark.Monroe Місяць тому +1

      Ya TX has alot of regulations around this

    • @alankalupa7585
      @alankalupa7585 Місяць тому +1

      Texas Property Code 5.072 does not allow oral executory contracts.

    • @REIwAlexY
      @REIwAlexY Місяць тому +1

      @@alankalupa7585 yep, that's why you don't do oral ones. Everything in writing or it didn't happen

    • @REIwAlexY
      @REIwAlexY Місяць тому +1

      @@Mark.Monroe yep! After 2005, a whole lot more got steadily added sadly