Hi, it’s Lou Brown. I’m back with another of my 101 cash flow accelerators where you can separate yourself from being just a landlord into a housing provider, an affordable housing provider. In fact, a certified affordable housing provider.
One of the things that I teach you to do in this particular segment is to separate your documentation. So in other words, we’re entering into two different agreements. If we’re going to do a lease with the option to buy, we’ve got a lease, you’ve got what we call our standard rental agreement, and that covers the relationship that we have with them as an occupant of the property. Separately, they’re going to purchase another thing called an option to buy and that option to purchase is going to give them the right to purchase that property within a designated period of time with a certain requirement within that, and as a result of them agreeing to that separate agreement, they now have that option to purchase the property.
Well, my advice for you is to stay out of trouble with the court. If you combine your rental agreement with your option agreement in the same document, it can create problems for you. The judge can look at that option fee that you collected, which is typically nonrefundable. And that’s what we want to collect, right? Nonrefundable option consideration means that we can actually spend the money now we don’t have to escrow it, we don’t have to wait until later. And if you choose to give some or all of that amount as a credit towards their purchase of the home, that’s fine. That’s going to be designated in the paperwork. But you can go ahead and spend the money right now. And there are so many benefits to doing that. Of course, that’s a major cash flow accelerator. And the important thing is documentation that your standard rental agreement is separate from your option agreement because there are two different agreements that are happening simultaneously.
And so you want to get the benefit of both of those and not have the judge look at your option consideration as the security deposit. So over in the standard rental agreement, we’ve got that segmented out. And in fact, we teach you that there’s actually another way you can handle your down payment in relation to the option agreement. So those are two different documents, two different agreements that you’re making with the resident that will keep you out of trouble. Baby, that’s a brilliant thing.
So hopefully this has been of benefit to you. Like it. Love it. Share it. And do subscribe. Thanks so much for joining me. If you want to learn more about options, you can definitely do that at my lease options course. StreetSmartInvestor.com goes to tools and then go to volume 9 lease options. Well worth the investment. Get the six CDs, get the forms disk with all of the forms for both buying and selling, using the lease with the option to buy technique. It’s a wonderful way that we’ve used for now over 40 years of being in this business of buying, holding, and selling property, giving others the opportunity and the path to homeownership. You too can make a difference in your community and in other people’s lives. I hope this has been of value to you. Like it. Love it, share it, and do subscribe. Thank you so much for joining me. My name’s Lou Brown. Yeah, baby!
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