Hi I am a new investor and I need some help understanding where the assignment fee would come from for a Cooperative Lease Purchase.
The way it has been explained to me is that it comes off the sellers price for the home.
Sellers Price 100,000
OPtion Fee From Tenent Buyer: 3,000
Sellers Final Price 97,000
Wouldnt it make more sense it just make the price for the tenant buyer 103,000 and get your option fee that way.
Any help would be appreciated as to how one of these deals work.
Thanks!
I usually try to raise the price by the option fee if I feel there is room for it.
Normally the houses I work with are listed, so I normally raise the price by the option fee.
You can’t always, such as on higher end houses, or because the numbers are too tight, but I try to if I can.
If the T/B asks why their price is higher, you can always explain that the owner is giving the difference back at close in rent credits.
They very rarely ask about the price difference.
Pete, you can’t just raise the price of the property to cover the assignment fee. Overprice it and you won’t find any takers.
For all things Cooperative Assignments I recommend Carbonare over at The Naked Investor. Loads of info there on the strategy.
AJ is right that you can’t overprice it, so you have to look at each deal and see if there is room.
In most cases that I have, our Option Price is higher than the listed price by our fee or close to it.
The people looking to get into a lease option are more concerned with monthly than price, but you can’t have the Option Price too high, or they will walk.
For example, a house listed at $100,000, I can easily market the Option PRice at $103,900 with no problem (again, assuming I feel it would appraise in the next 12 months or so)
However, Take a house listed at $400,000…well…I can’t just raise the Option Price to $412,000…more likely closer to $405,900 or so.
The buyers are willing to pay a little more for time and the flexibility to have the lease option, and the owner is giving them back a portion in rent credits as well.
Think of the rent a center mentality…You can buy a fridge for $600…or you can rent to own for $25 a week…for 8 months, and pay $800…
When an owner contacts me, I look at the listed price and look at what I think the appraised value would be, and se if there is room to bump up the price.
In 8 years, I think I’ve only had 2 or 3 people that bawked at the price and walked.
Price or terms, not both…that’s how I look at it.
I do tell sellers that if they look to drop their list price while we are marketing the house, to please let me know, because I son’t want them to drop the list price $5k, and now instead of $3k higher, we’re $8k higher! THAT will cause red flags with our buyers.
I’m not sure if I can post this here…but if you look at the listings on leasingtobuy.com pull some of them up on realtor.com or zillow etc and look at the MLS price.
You’ll normally see our option price is a little higher than the list price.