I am considering a L/O purchase.
the trouble that i am having is that the property is in a diverse neighborhood, they have apartments, high and low rises, condo town houses and SFH. The rent in the area range all the way from 850 to 1200 for the same setting.
So i guess what i would do is just get the paper work signed first, then test out if the rent that i have in mind works. if not then get the hell out. any alternatives?
Well, two responses her.
First, you can contact some local property managers, tell them you are considering renting it, and what whould they charge for PM and what do they think it would rent for. Get 2-3 to give you advice and the rent should be somewhere in the ball park.
Second, though, if you are doing a L/O I wouldn’t be that worried about the rental rate. the reason is I would tie the lease rate to the potential mortgage rate. FOr instance, if your particular place could get $900 rent but a mortgage would cost around $1500, I’m charging $1500. Why? Because they aren’t renting a hourse, they are leasing to buy a house.
If you rent (lease-option) a house for the mortgage payment, you are LOSING money in a big way. I would NEVER do that!
Mike
Property Manager
I never said set the lease at your mortgage. I said set the lease at what the mortgage payments WOULD be.
For instance, if I buy a $220k (FMV) house at $150k with a mortgage at about $998/mo, the mortgage for a $220 house is about $1500 so my lease payments to the T/B will be at least $1525 with a nonrefundable option fee of $5k (or whatever I can get) and a sale price of $230K.
A situation of setting the L/O payment at the amount of your lease is a horrid money loser. You would have to have a HUGE option payment up front to make it worth while (in our case, maybe $12k), and 99% of T/B can’t swing that.
We useually watch the newspapers and call on for rent signs in the neighborhood.
I don’t like the mortgage approach - if your market is slow like most of the country you might not be able to get the upper end of the rental range. Especially in December. Febuary - march when tax returns start coming you will have a better shot.