I've been approached about a lease/option on a rental condo I own. Sounds too good ... could this be a scam?

Asked by Hunter On The Hill, 80112 Tue May 12, 2009

I own a rental condo outright. It is currently vacant and I am advertising for a renter on Craigslist. I have been approached by an investor who wants to sign a lease for the property, find a tenant who is interested in a lease with option to buy, manage the property, collect rent (and presumably give it to me), and at the end of the option period deliver to me a "full price" sale. All at no cost to me. Riiight ... I smell a rat but am not sure what kind. Does anyone have any insights into this?

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Shelley Brya…, Agent, Englewood, CO
Mon Jun 4, 2012
Unfortunately, many of these don't work out where the buyer can purchase. So you might enter it knowing that it might just be a rental and when the lease option ends you might need to start again.
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Eva Maliarak…, Agent, Englewood Cliffs, NJ
Sat Oct 31, 2009
Hi Hunter,

Renting with the option to buy can be done but it should be done but the right way in order to protect you self as the seller. You do not need an investor in order to do so, you can do it your self if you know what you are doing or higher a realtor who is well informed in the topic to help you with it.

When renting to someone with option to buy the monthly fee has to be set higher than the normal market value of the property and the lease must be prepared with deferent terms than a normal lease; the extra moneys is money that the tenant would loose in case he will not purchase the unit at the end of the term of the lease. Renting rather than selling is not something I usually recommend but at this time it is best to hold on to the property for as long as you can or until the prices go up. If you sell a couple of years from now you will do much better than if you would sell today even if you rent the place for now.
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Dan Chase, Home Buyer, Texas City, TX
Thu Oct 22, 2009
When you give the lease with option to buy you have 2 problems at the same time.
1 prices drop, they will not buy. You are stuck for a longer period of time because now you can not sell.
2 prices go up you lose your appreciation. The one who has the lease gets it all.

It makes no sense to give someone else a legal reason to take your rent money and then maybe not pay it to you. <OUCH>
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Michelle Wil…, , Englewood, CO
Thu Oct 22, 2009
Hi Hunter:

I would be leary of anyone approaching you in that manner. Good for you that you own your rental outright. If you want names of true property management companies, please call me 303-717-5285. I can give you names of companies that are members of the Realtor board. Especially when advertising on Craigslist, you are bound to get email from people in other countries that are looking to dig into your personal information for their benefit. Be careful what you disclose to them!
This person is looking to skim money off the top.
Michelle Wilson, Keller Williams DTC, unique.estates@kw.com
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Mark Cooper, Agent, Englewood, CO
Thu Oct 8, 2009
Certainly could be, BE CAREFUL.....you hold the cards, so don't waste your time with this individual, if your rental rate is market, it will rent, plain and simple. Don't complicate things with someone YOU DON'T KNOW. If you want to sell the unit use a real estate agent that has experience. There's plenty of us out there. You can check our credentials and we have to be licensed. Make sense? If I can be of further assistance, feel free to find me at http://www.come2colorado.com, I've been in business 17 years.
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Jo Pellegrino, Agent, Englewood, CO
Wed May 13, 2009
That old adige is true. There are several scams out there involving these lease options. SInce you own your property free and clear, I see no benefit to you whatsoever. You don't need this "investor" to bring you a buyer. Several things to note, the Colorado Real Estate Commission has no approved contracts for lease/option or lease/purchase. Therefore, the contract should be written by an attorney. Secondly, there's a difference between a lease/option and a lease/purchase. With the lease/option the tenant is not obligated in any way to purchase at the end of the lease term. My husband is a Certified Property Manager and has always discouraged our landlords from becoming involved in this sort of thing, as nine times out of ten they never turn into a sale. Then you're left with a vacant unit again that will most likely need carpet and paint again. We have been very successful with finding renters on http://www.Rentals.com. It's inexpensive and works very well. Good luck with whatever you decide to you. If we can provide you with further assistance you can contact us at TheEllisTeam@earthlink.net. or through our website http://www.ColoradosBestHomes.com.
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Dave Sachle…, Agent, Parker, CO
Tue May 12, 2009
Normally the way this works is that the investor wants to get control of a property without affecting their own credit and without a cash for a down payment. He turns around does a rent-to-own at a lease price higher than what you want for rent, takes the difference as cash flow. Then when it comes time to sell he will sell it higher than your full price to the rent-to-own-purchaser for additional profit. He may have watched one of seminars by those late night TV advertisers and mass contacts landlords hoping to fine one who is desparate to get the place rented. If there is a margin to make money you would be better to apply the rent-to-own strategy yourself and avoid the middleman. If you want out of renting and this is tempting make sure you hire a knowledgeable attorney to make sure you understand all the ramifications.

If you want more information or a name of couple of good attorneys please email me at Dave@KeyHomeTeam.com
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Wow. A very negative bunch of people replying. Keep this in mind; if you are trying to rent or sell your condo, and you have been at it for a while, you are racking up debt. Insurance, association fees, property taxes, and possibly assessments. Month after month, these debts can become a huge burden. If you're like most people, managing a condo is not your full time job. So... Why not allow an investor or real estate professional help you rent and or possibly sell the property. This takes the cost of owning the condo off you while allowing you to maintain ownership until you have a buyer. If no one buys, you basically have your own little property management company working for you to keep it rented. It is too easy to write a routine inspection clause into the agreement to protect the value of the condo, and to add a deposit for repairs in cases where the condo doesn't sell, and the former occupant damages it. Plus, major damage to the interior is usually covered by insurance.
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