I found a great town house, I am interested in living in. The owners are open minded about doing a lease option, here is the information I have as of now.
They bought the house 3 years ago for $399,999 and refinanced 6 months ago.
Current tax assessment is $308,370, and average sales price right now is around $320,000.
Over a period of 10 years average appreciation rate has been around 6%. The rent they are asking is $1800, and they are open to doing a long term agreement 5 to 7 years perhaps more.
I am new at this, and am trying to come up with ways to make it a win-win offer. I am hoping some of the more experienced investors can give me some insight as to what kind of terms I could offer.
Thank you in advance for you help!
You don’t have enough information here to have anyone from this forum answer the question. What is the seller asking? Is this property in tip top shape? Can you lease option it with equity from day one? What are other houses in the area renting for that are similar? These are the questions we need answers for.
If you can’t lease option it from day one with equity you should keep looking for a better deal unless the lease option rent is way below the market rents in the area. If the house needs a ton of work where it would offset the equity in the house you need to look for a better deal. Forget what the house is worth later. You don’t buy houses by trying to figure out values in the future. You base your decision on today’s values. That’s called gambling and not investing. It’s a bad habit. Sorry to be harsh but you’ll just hurt yourself later if you go against any of these rules.
Here is a good deal
House is worth $320,000 and needs no work with market rents around $1800 in a good neighborhood.
You lease option it with a purchase price of $275,000 and make payments of $1500 a month for as long as you can get from the seller. This way you have 50k in equity from day one with another $300 in rent you save every month and anything in the future as far as appreciation is a bonus.
Good luck with your search.