Lease-Option Credits
Hello,
I am trying to understand how the option payment and rent credits are applied to the Tenant-Buyer in a L/O Contract. In other words, what is an example of how an agreement would be structured with your tenant-buyer in regards to the option payment and rent credits. Exactly what are the benefits to the Tenant-Buyer in a L/O agreement?
Many Thanks!
The tenant/buyer lease option gig is the best of both worlds for you and the buyer.
You get a tenant and a buyer who has more money at risk should they decide to move or tear the place up you have a large non refundable down payment. You can also charge more that normal rent for the property. Say the rent for your unit if $600. You could get $700 and credit $100 per month toward the purchase price or down payment. You can also sell for a bit higher than market price. Say the property is worth $50,000 today. You may want to sell for $55,000 or $60,000 a year or two into the future. Assume that you agreed to sell for $60,000 in two years with $3000 option money down today and $100 per month towards the down payment. At the end of two years they would have a credit of $2400 plus the $3000 down or a total of $5400 owing you $54,600.
The tenant benefits in that he has has a place he/she may call home. The American Dream and other countries as well if not even a bigger dream there. If their credit is weak it can give them time to fix it and get approved for a new loan. If they still can not get approved you have several options including eviction, selling on a note and owner finance or cancel the sale and lease I hope all this helps you some. Let me know if I can help further,
Good LUCK and Thank You
Hope this helps some
Ted Jr
If the deposit and above market rent are actually credits towards the purchase option price, how should I structure the deal with my "motivated seller" so that I maximize my profits as the investor? Thanks so much for your response!
guitarbrad,
You should have already negotiated the sale price of the house prior to your optioning it to a buyer. Good luck
Hello Everyone,
I just read an article this morning by a local realtor advising homeowners not to give an credit from monthly payments since they are doing the individual a favor with the option. They also said to limit the option to six months and that lease optioning is a bad move for a homeowner... I was really unhappy to read that as it is a good deal for the homeowner and the purchaser. It allows the owner to have a higher than average rental income and a fair purchase price for their home while allowing the buyer the chance to build some equity and also have a chance to purchase a home they could not otherwise afford.
[addsig]