“I’m a beginner. Number one, when the seller and tenant buyer sign the lease option contracts do we have to get them notarized and/or recorded at the county, or is it enough to simply have signed copies in the possession of the three parties?” – Basal Akim
There’s nothing that has to be notarized on a lease option. It’s the same as a lease. Leases don’t have to be notarized. If you record something, it’s going to have to be notarized. So if you’re buying a property and you want to record a cloud against the title so that your seller can’t sell it out from under you, then you might want to have it notarized and then file that at the county courthouse. That’s if you’re buying.
If you’re selling you don’t want to do that because once, if that person defaults or they don’t exercise the option then you’ve got to find a way to get them off of that title and that means you have to get another signature from the later. So, we don’t have them sign the paper unless we’re the ones that are buying. We always want to be in control of the deal and in the most control possible.
We have to assume that we are the most ethical person in the room and we know that we’ll do the right thing, but we don’t know that the other party will do the right thing. So we have to put ourselves in control so the right thing can be done in any particular transaction. It also puts the responsibility on your shoulders to make sure you do the right thing.
The second question here is, “How exactly do we set up the flow of payments from tenant buyer to me, the investor, to the seller? Do we, for example, have to set up an escrow bank account in our name?”
Let’s say we’ve got a property. The seller wants $150K for it. You’re going to raise it to $155K and you’re going to ask for $5,000 as a down payment, lease option fee, for the new lease option tenant and you’re going to ask for the first month’s rent, let’s say it’s $1,500. So you’re going to get $1,500 plus you’re going to have $5,000 from the seller. $5,000 of it goes to you, $1,500 goes to the seller as their first month’s rent.
You’re going to get all the paperwork signed. You’re going to have that money wired to your account and then you’re going to get the signature from the seller. The seller is going to sign it and then you’re going to wire him the $1,500 to close the deal. And that’s all that you have to do. You could also get it with a cashier’s check. Just make sure that when you get a cashier’s check that you take it to the bank where it’s drawn against and get cash for it because cashier’s checks bounce, too.
There’s a lot of fraud with cashier’s checks. That’s why I like wiring funds better. You can also do an ACH if you set up a business account that allows ACH’s. You can actually do a direct debit from peoples’ accounts. Give yourself a few days before you let them move into, make sure that it doesn’t bounce and that it goes into your account. Once it goes into your account and is verified there, then you know that they can move in.
But wiring the funds makes it possible for you to do it immediately. So you do need a US account. If you’re working from overseas, and I’ve got a lot of people that have worked from overseas. It doesn’t look, I don’t know if you are or not, but, if you’re working from overseas, you’re going to need a US bank account because you’re going to need to wire your funds into that account.All right, hope that answers the question. Thanks.
