Quote:
On 2003-10-30 22:29, sammyvegas wrote:
Option consideration is (you should make certain that the optionee understands) NON REFUNDABLE.
You can do what ever you want with it. Hopefully you will use it to invest in more real estate. Dont do like some nimrods do and blow it.
The option consideration is used to reduce the purchase price if they exercise the option.
Hello all,
So if wanted to L/O my property and I accept additional monthly payments to cover the down payment; I should reduce the selling price?
Ex- I'm asking $80k , w/ $5k down( in payments over 24 mo. max) After the time frame or during the t/b purchases or not. Since the money is non refundable it's mine. If they purchase say in 12 mo. , they need to complete the total down then proceed?
[ Edited by MRCCAL on Date 11/01/2003 ]
If you stretch the down out over time with payments don't lower the price raise it because you are wait for money that they should've had upfront. In essence, you are financing their option payment. Make some interest on it. As far as an early buy, theyb need to come up with the full down at that time unless they can get financing without the full down.
Also realize that you will not have to pay taxes on the option payment when you receive it, you will have to pay taxes on it when you sell the property to the t/b.
What you make on the lease in the mean time is your perogative. I usually charge at or above the going rent rate. If my payment is $500.00 and I can get $1000.00 I will take it. The extra $500.00 a month is yours to keep as rental income. As to avoiding taxes, I could go on all day, but the simplest way would be to 1031 exchange and buy another property. I suggest reading some back logged posts in regards to avoiding taxes.
Okay, so let me get this strait. If I L/O a house to someone for say, oh, 5K down and 900 per month (600 mortgage and 300 for me). Now, the house has a balance of say, 85K. I option it for 100K and when the T/B purchase it they finance it for 95K? That would be 100K minus the 5K down is that right?
Also, do you give them a credit for their monthly payments? I've seen in some places they'll say 50% of your monthly payments is credited to your final price. Is that how it is done? Or you just say, your simply leasing the house and no credits are given?
I've never looked at a L/O course I'm just learning what I can from the boards until I can get one.
its the future price of the home that the option money is being deducted from correct?
And do 100% of the monthly payments you receive from your t/b (in this case $900) go towards reducing the future price of the house...or just the rent credits?($300)
Im stuck on this point so any help would be greatly appreciated.
[addsig]
The beauty of the lease option is the many and various ways it can be written. Such variables are the result of the bargain made at time of lease.
The rent is $900 a month and you may have an option to purchase this house anytime during the next 24 months by making a payment of $2,000 at this time.
All rent is the Landlords. The option payment of $2,000 entitles you to purchase the property at the agreed price. say $200,000. Now thats the simple way to handle.
You can of course play with the format. You can give a partial credit on each payment toward the future purchase.
Of each monthly rental payment of $900 the sum of $200 will be applied to the future agreed upon purchase price of $200,000.
If the monthly rental payment of $900 is made on time by the lst of each and every month. The sum of $200 will be applied to the future agreed upon purchase price of $200,000.
You see how simple modifications and changes of the Lease Option can be used to motivate the Rentor/Leasor to make payments on time and to feel that each payment is reducing the amount he will have to pay when he excercises his option.
You can also give appliances as consideration also.
What is often done is to extend the option period if the Rentor cannot purchase the home at the end of lease. You may increase the purchase price of the home if prices are going up, this keeps the rentor on track to try and buy at a later date.
Once again we are in Negotiation and the basis of that is your analysis of the Rentor/Future Buyer.
I hope this clarifies a little what is really going on in the Lease/Option.
I have had them chase an up market for over three years. Have them swing into ownership with a new loan. Right after completion of the sale, the market dropped. They stayed in the home as by that time we had arranged an equity line so that we could have another bathroom added. Shortly after that the third bedroom. They rode it through the decending market. A year or two latter it turned and they went on to glory. By hanging on they finaly established a true equity. But during all this time the family grew, were contented and the house served them well.
All parties in the transaction were served well. The essence of the perfect transaction. Everybody happy.
Option consideration is (you should make certain that the optionee understands) NON REFUNDABLE.
You can do what ever you want with it. Hopefully you will use it to invest in more real estate. Dont do like some nimrods do and blow it.
The option consideration is used to reduce the purchase price if they exercise the option.
Quote:
On 2003-10-30 22:29, sammyvegas wrote:
Option consideration is (you should make certain that the optionee understands) NON REFUNDABLE.
You can do what ever you want with it. Hopefully you will use it to invest in more real estate. Dont do like some nimrods do and blow it.
The option consideration is used to reduce the purchase price if they exercise the option.
Hello all,
So if wanted to L/O my property and I accept additional monthly payments to cover the down payment; I should reduce the selling price?
Ex- I'm asking $80k , w/ $5k down( in payments over 24 mo. max) After the time frame or during the t/b purchases or not. Since the money is non refundable it's mine. If they purchase say in 12 mo. , they need to complete the total down then proceed?
[ Edited by MRCCAL on Date 11/01/2003 ]
If you stretch the down out over time with payments don't lower the price raise it because you are wait for money that they should've had upfront. In essence, you are financing their option payment. Make some interest on it. As far as an early buy, theyb need to come up with the full down at that time unless they can get financing without the full down.
Also realize that you will not have to pay taxes on the option payment when you receive it, you will have to pay taxes on it when you sell the property to the t/b.
Taxes on the payment and the equity after the sell? Can't I invest a % to avoid this? The home is an old repo so I stand to earn a good cash out.
And if they do have the down payment up front would I still charge a monthly fee for the option to purchase within say 2 yrs?
What you make on the lease in the mean time is your perogative. I usually charge at or above the going rent rate. If my payment is $500.00 and I can get $1000.00 I will take it. The extra $500.00 a month is yours to keep as rental income. As to avoiding taxes, I could go on all day, but the simplest way would be to 1031 exchange and buy another property. I suggest reading some back logged posts in regards to avoiding taxes.
concerning the contract... it is applied to the price of the home
Okay, so let me get this strait. If I L/O a house to someone for say, oh, 5K down and 900 per month (600 mortgage and 300 for me). Now, the house has a balance of say, 85K. I option it for 100K and when the T/B purchase it they finance it for 95K? That would be 100K minus the 5K down is that right?
Also, do you give them a credit for their monthly payments? I've seen in some places they'll say 50% of your monthly payments is credited to your final price. Is that how it is done? Or you just say, your simply leasing the house and no credits are given?
I've never looked at a L/O course I'm just learning what I can from the boards until I can get one.
Thanks
Giving rent credits is totally up to you.
I have given everything from $0 to $600. It all depended on the market and how fast I wanted to get rid of the house.
Just make sure that your numbers work and you should be fine.
Okay thanks, I think I'd rather try this route than to flat out rent the home any longer.
DaveREi,
its the future price of the home that the option money is being deducted from correct?
And do 100% of the monthly payments you receive from your t/b (in this case $900) go towards reducing the future price of the house...or just the rent credits?($300)
Im stuck on this point so any help would be greatly appreciated.
[addsig]
The beauty of the lease option is the many and various ways it can be written. Such variables are the result of the bargain made at time of lease.
The rent is $900 a month and you may have an option to purchase this house anytime during the next 24 months by making a payment of $2,000 at this time.
All rent is the Landlords. The option payment of $2,000 entitles you to purchase the property at the agreed price. say $200,000. Now thats the simple way to handle.
You can of course play with the format. You can give a partial credit on each payment toward the future purchase.
Of each monthly rental payment of $900 the sum of $200 will be applied to the future agreed upon purchase price of $200,000.
If the monthly rental payment of $900 is made on time by the lst of each and every month. The sum of $200 will be applied to the future agreed upon purchase price of $200,000.
You see how simple modifications and changes of the Lease Option can be used to motivate the Rentor/Leasor to make payments on time and to feel that each payment is reducing the amount he will have to pay when he excercises his option.
You can also give appliances as consideration also.
What is often done is to extend the option period if the Rentor cannot purchase the home at the end of lease. You may increase the purchase price of the home if prices are going up, this keeps the rentor on track to try and buy at a later date.
Once again we are in Negotiation and the basis of that is your analysis of the Rentor/Future Buyer.
I hope this clarifies a little what is really going on in the Lease/Option.
I have had them chase an up market for over three years. Have them swing into ownership with a new loan. Right after completion of the sale, the market dropped. They stayed in the home as by that time we had arranged an equity line so that we could have another bathroom added. Shortly after that the third bedroom. They rode it through the decending market. A year or two latter it turned and they went on to glory. By hanging on they finaly established a true equity. But during all this time the family grew, were contented and the house served them well.
All parties in the transaction were served well. The essence of the perfect transaction. Everybody happy.
Quietly, Lucius
Lufos,
thanks for the time to write that out! Ive read it repeatedly and it defintiely helped me clear quite a few things up.
[addsig]