Hello all, :biggrin
Does anyone ever allow the tenant-buyer to exercise their right to buy the property during their lease term (1-5 years)?
OR
Does anyone ever include in their option agreements that they can only exercise at the end (or within 3 months of expiry) of the tenant-buyers lease?
Thanks so much :cool
First of all I’d never go more than 3 years. Second I like to go one year and would extend another year if the buyer was showing credit improvement, and willing to pay more option consideration. Third if they want to get a loan early thats great. My thoughts anyway. Herbster
I agree. Thanks so much for your opinion. :beer
Whatever is agreeable to both parties, as long as it is within the confines of state law, is fine.
Interesting questions…which are more revealing than what is written. Sounds like these questions might be asked as the margins are too narrow or the margins require the market to recover so that the appraisals will match that actual option pricing.
So, here are the answers:
Q1. If you have a profit marging built into the purchase option and there are no prepayment penalties on your contract with the title holder, than YES, allow the tenant/buyer to exercise their option which will pay you your windfall profits sooner!
Q2. The only reasons you would not allow the tenant/buyer to close prior to the end of the lease period would be:
a. you have a prepayment penalty on your side of the contract
b. your profit margins are in the monthly cash flow and not in the purchase price
c. the appraisal for the new tenant/buyer’s loan will not come up to the price until the market recovers by the end of the lease period.
Hope this helps.
Rob
R.E. Investor/Mentor
Great answers, thanks so much & it’s good to know I can get answers like these here. :biggrin