How Many Of Your T/B Actually Purchases?
I was wondering what percentage of T/B actually purchase the home they are leasing from you? Is it realatively high or just like 25% or so?
Also, if you require a bigger option deposit does that increase the likelyhood someone would buy at the end of their lease since they had to put so much down? How do you determine how much to charge someone for an option deposit? I was thinking something like a few months rent, maybe one or two plus 2-3K.
Thanks,
Mitchell
I think the downpayment would be around 3-5% of the FMV.
I was actually wondering the same thing...but i wanted to know what happens in the case that the houses
in the area at the end of the contract have gone up dramatically and youre locked in for a much lower selling price.
Then of course he would buy it!
I guess if the market declined then they would have no interest in buying the house, no matter what they put down for it.
[addsig]
You'll probably have several completely different opinions on this question, as it will reflect greatly on how each investor chooses to do business.
Some investors will let anybody in the property with the required down. Others want the down plus some insurance that the monthly can be paid (ie proof of a job). These would likely have a higher than average turnover rate, or tenants not choosing to buy, because they are much more likely not to be able to qualify for a loan at the end of the term.
Other investors follow a principle closer to me own. I send the prospective tenants to my mortgage broker BEFORE I agree to owner finance them. He will then tell me IF they'll qualify, and if so, when (in 1yr or 2yrs). In some instances, they will qualify now, and we can sell outright.
As far as the down goes, 3-5% is a good start, but ultimately, you'll have to take what your current market will bare. Especially with L/O's, 1-2% of FMV is more common.
IF the market would happen to jump dramatically, it wouldn't matter. A good RE investor doesn't make their money on speculating, anyway.
Roger
Generally the higher the Option deposit the more likely the buyer will purchase. I know if I put down a higher non-refundable deposit towards a house, I would think twice before choosing not to buy. Of course, certain circumstances could arise to where the T/B does not have a choice and chooses not to excercise their option to buy. But of course being the smart investor, term with your T/B is shorter than that of the sellers, so you have time to find another T/B. This could also make you more profit in the end as well, due to the fact that the Property has hopefully gone up in value since during the term of the last T/B, so you can sell for higher.
Got a litte into rambling. Good Luck
rajwarrior, that is an awesome idea! I never even thought about sending them to a mortgage broker before having them sign on the dotted line. I am most certainly going to use that tactic.
Thanks a lot man
Mitchell
It's not just a mortgage broker, but rather YOUR mortgage broker. If you're going to be doing this, finding a good mortgage broker will help you close many more deals, both on the buying and selling.
Roger
What is the best way of finding a mortgage broker? I know I need to do this but for the life of me I don't know what to do. Do I just go up to them and say, hey, I'm an investor and I will need your help later, on, how about it?
Any suggestions?
Mitchell
Ask for references at your local Real Estate club.
Tom