Chris Prefontaine walks through structuring a lease-purchase when a seller has both a first and second mortgage. Use Sections 8 and 13 of the QLS contract to tie the purchase price to outstanding mortgage balances. For variable-rate seconds, get the loan docs, understand annual rate caps, and build in buffers for rate increases plus tax and HOA changes.
Chapters
How do you structure a lease purchase with a seller that has a first mortgage and then a second mortgage with a variable rate? It's not much different. And let me just kind of recap for those of you that may not know, our agreements are all prewritten. So the lease purchase agreement is all prewritten for you. It's in the document and forms module in QLS Home Study. If you don't have Home Study yet, go to smartrealestatecoach.com/homestudy. QLS YouTube. QLS YouTube. Because in the home study program, before I answer this question, you have how we buy with sandwich lease, lease purchase, how we buy sub-2, how we buy owner financing, live script calls with sellers. You get to hear coaches, myself and the team members, the family members, a whole buyer module. My son Nick, where he breaks down with the coaches how to exit these properties, super important, and how you create the 3 paydays and some live buyer meetings. It's invaluable, guys. It's the most robust thing out there. So I wanted to make sure you understood that that's where these agreements live in the QLS home study course. In Section 13 of that agreement, it basically says the purchase price equals and it's blank and the purchase price is going to always equal the balance of the 2 mortgages or 3 or 1, doesn't matter, that are listed in Section 8. So in Section 8, you list the first and the second mortgage and I'll get to the variable thing in a minute. So it says balances of those mortgages at time of financing because they'll be less than and any cash that you promise, any equity that you promise the owner. Sometimes there's none, right? So if it's just the balances, you'd say the balances of the mortgages at time of financing listed in Section 8. That's it. No, no, no additional cash. Now, how do you safeguard to go to this? The community member's question that came in, and I hope you're watching this about a variable. Well, It's not too difficult. You get the loan docs from the seller and you build in— you understand where the caps are each year. So what's the max exposure you can have if your lease purchase is going to be 3 years? You're only looking out 3 years. It's not that difficult. If you're looking out 9 years, you want to make sure you understand what that loan can and might do, right? Okay. That's number one. Number 2, could you maybe— and we've maybe done this once or twice— Could you maybe, in addition to the clause in your buyer agreement— now we're switching to buyer— that says they're going to pay any increase in taxes, could you— in HOA fees, could you maybe build in a buffer there for rate changes in the market? You can do whatever you want. It's your house, right? Not sure where to get started? Go to smartrealestatecoach.com/getgoing for free books, strategy calls, and a whole bunch more. We're going to help you get going the wicked smart way. We've been after this for over a decade doing exactly that. If you have other questions on this, just come to the Wicked Smart Sit Down every week. We do it at 4 Eastern Standard Time. Been doing that for, I don't know, 8, 9 years now. And we'll answer these types of questions, but keep them coming. This is great. Make sure you subscribe to the YouTube channel in general though, so that you can get all the Motivational Mondays, Q&A Thursdays, which is this, as well as the Deal Structure Sundays. Those are— they're all each and of themselves an invaluable piece of the genius model which we teach from, right, which is the skill set, the mindset, and the systems you need. All you need all to be working at all times. So again, reminder, go to smartrealestatecoach.com/QLSYouTube to grab the QLS Home Study Course. Guys, this is another plug for it. Sorry, but you got to know that this is 4.0 as of the time of this filming in 2025. That means 4 times since we released the course at the first QLS Live event in 2016. 4 times. We've painfully with the team gone through updated scripts, updated legal agreements, updated processes, because as, as the market shifts, things change. And if you're going back to old courses from mentors that don't care because they just love to market stuff, that's not a course that's going to keep you well-tuned, oiled machine. You want this course that we have, it lives online. You want this to be your resource center forever, for life. Go to smartrealestatecoach.com/QLSYouTube. See you next week on the next Q&A Thursday.
