Help in Lease Option needed

General Real Estate Investing
1

Okay, I have to admit that I am still not quite familiar with this method.

I have a lead. Asking for $225K (FMV), monthly $1,250.

My plan is:
accept the final price $225K (FMV)
pay $1,250 per month, with $300 credited to the final purchase price.
no deposit,

Then find a tenant / buyer
non-refundable $5000
pay $1,300 per month
final price $250K

Is this plan reasonable. Do I have any unforseen error committed?

Thank you for any help.

2

The biggest problem you have here is too figure out what the house is worth. Without that you don’t know if its a deal or not. If the house is worth 250k then it may be a good deal, if the house is worth 200k then you may want to renegotiate. I only say this because when it is time for the lease option tenant to get a loan you want the bank to go along for the 250k. If the bank doesn’t go along for the 250k you’ll never you a pay day on the other end. Good luck hunting,

3

You are describing a sandwich lease option. I’m short on time so use the search button on the top to find out more about them. Herbster

4

Using the numbers you gave, the risk to reward ratio isn’t good for you at all.
First, why would you pay asking price? These days, the buyers are calling the shots. Or is that $225K price such a good deal?
Second, your assumption seems to be that you are guaranteed $5K option money from your tenant/buyer. Maybe you’ll get that, maybe not.
The bottom line as I see it is that there isn’t enough of a spread to be in the middle of this deal. Again, the risk to reward ratio isn’t in your favor.

5

AJ, Thank you for this advice.

I will construct a better offer and send to him.

6

As for the final purchase price, I feel it is okay to buy at FMV in a lease/option. Wouldn’t my tenant buyer accept a higher price b/c I make it easy for them to buy?

I understand the rent may be too high. I was trying to cover the mortgage payment to make the seller happy also. There is some risk. Is there any way to decide a fair market rent when no one else is renting in that area?

7
As for the final purchase price, I feel it is okay to buy at FMV in a lease/option. Wouldn't my tenant buyer accept a higher price b/c I make it easy for them to buy?
Probably not in our current market. Buyers are in control, even if you "make it easy for them to buy". Play it smart and drive a hard bargain when you buy.