Hi,
For those of you practising rent-to-buy options, i request you to give me some idea/advice as to how to price in the following situation.
All ideas greatly appreciated.
1b/1ba condo market price: 230K
My purchase price: 225K
Market rent in the area: 1200$/p.m
What could be the monthly rent on rent-to-buy option?
What could be the Option price?
What could be the selling price at the end of the term?
How long typically would be the option Term?
I assume when the tenant want to exercise the option, i will have to give credit of the rent towards downpayment. What percentage of the rent would that be? I also assume the Option price also will get credited to the tenanat at closing if he choose to exercise the option.
The answers to your questions are best determined by your local market conditions. What will the market bear for a purchase price and monthly rent, for example? As for rent credits, again, market conditions will determine the percentage. How high do you need to go to quickly fill the property, which should be your first priority.
It appears to me you paid full retail. Is your market that strong that you can now inflate the price to your t/b?
When setting up a sandwich lease, the deal between you and the homeowner should be for as long as possible. On the other side, between you and your t/b should be kept to a twelve month term.
Option consideration is indeed credited to the purchase price, if/when the option is exercised.
As for rent credits, again, market conditions will determine the percentage. How high do you need to go to quickly fill the property, which should be your first priority.
I would RUN far and fast from this deal (hopefully you haven’t bought it yet). Unless you’re speculating on appreciation, you WILL lose money on this deal, probably a LOT OF MONEY. OUCH!
Lease option buyers are really renters. In the majority of cases, they don’t exercise the option to buy the property. Unless you can charge rents well above market and get a “sale” price well above market, this is a loser in every direction.
I never do sandwith leases, BECAUSE THEY ARE VERY DANGEROUS! They sound good in theory, but are ugly in reality.