Lease option question

Hey Lane

The owner should continue to carry the insurance and property taxes. You should absolutely make sure they have insurance on the home (most mortgage companies require it anyway). But if they own it free and clear, they may not have insurance so it's best to check.

I would suggest as part of your terms when submitting a proposal/offer to try and get listed as an additional insured on their homeowner's policy if their insurance company will allow it. You don't have to do this, but it would give you liability protection, you would get notice from the insurance company if they cancel it or miss a payment, and you'll probably be on the settlement check if the something happens to the home.

And lastly, you should absolutely require your tenant/buyer to get renter's insurance because the owner's policy doesn't cover the belongings of the tenant. This should get set up before the tenant moves in if at all possible.

So if you do you due dilligence and make sure the owner has insurance and your tenant/buyer has renter's insurance, your butt should be covered.

Good Luck

Jordan

Is this prop free and clear? If it isn't, I am assuming you are paying the sellers nut and making a little in the middle right?

and no he bought them all with 100% financing so he has no equity.

What are you trying to do here?

It sounds like this guys is a lanlord. All the other comments on who should carry and pay for everything are right. Since these are all mortgaged anyway, the owner has insurance automatically, and the mortgage payes property taxes. All you need to do is have the seller add you to policy & get the tenant buyer to get renters insurance. I don't think you have to tell the owner what you're going to do with the property once you lease option it from him. All he cares about is his mortgage payments getting taken care of. But with him being a landlord, it's ok.

Wendy Patton has a good ebook that talks about this more in dept. I will add more to this later.

i did exactly this on one of my deals and i can only tell you what i did.
I bought on a land contract from seller...1.$1000 down 2. $300 per mnth 3. total sale price of $50,000....with a balloon pymnt due in 5 yrs

sold to my buyer for $5000 down{which i used his portion[1000] to pay my seller
$600 per mnth at 8 % interest
total sale price $65,000

ok so i make 4000...up frnt.....300 per mnth cash flow.....and 15,000 + with interest

now in the contract it states that i must keep insurance on all structures for at least the amount owed to MY SELLER

NOW WHEN I sandwich lease option it to my buyer...in this contract between me and my buyer it states that he[my buyer must keep insurance on all structures and have ME AND my seller both on the insurance SOOO IF HE DOESNT PAY OR PAYS LATE THEN WE BOTH GET NOTIFIED .....NOW IT DEPENDS ON HOW YOU WANT THE CONTRACT WORDED.BUT THIS IS WHAT I DID.
HOPE THIS HELPS.... and it is not as complicated as it sounds.
ps if you want me to explain in more detail then contact me and i will go over anything with a fine tooth comb with you.

jay

to answer your ?? ...i do not have coverage on this property......MY BUYER HAS IT AND I AM LISTED ON THE INSURANCE BINDER....I GET MAILED AS SOON AS THEY R LATE ON A PYMNT.....

also ALL taxes and maintenance are MY buyers responsability as stated in contract
jay