Is there any kind of guideline for determining what you should make your option payment to a possible buyer on a lease with an option to buy?
5%?
10%?
Is there any guideline for determining how much more you can charge rent on a lease with an option to buy?
Most lease/option tenants don’t have 5-10% cash for an option payment. You may be pricing yourself out of the market. 3% is a good target. My local market conditions (buyer’s market, flood of available housing) has caused me to lower my option amounts from a year ago. I’m only getting 1.5-2% this year. It’s all about what your local market will bear. Look in the paper and see what other investors are offering for lease/option prices. Same goes for the rent rate – local conditions.
Good points. Can’t you make your rental price higher then market rents though since you are providing a more valuable and rare source of property for the owner to one day own?
Yes, you should be able to get 5-10% higher than straight rent. But, again it’s based upon local market conditions. For example, if your rent is $100 more than market you can sell that to a prospective tenant by showing a $200 or more rent credit that gets taken off the initial sales price.
Thanks for your info