Lease Option My Personal Home?
Hi,
I am fairly new to the forum. I am a home builder and build myself a new home every 2 years. I just bought a building lot and am going to start building asap. The RE market is VERY hot in southern utah and I could sell me current residence fairly easily and quickly. My question is this: Should I rent, lease option, or just sell? The home appraises for around 160,000 and I only owe 90,000 on it. It's just under 2 years old and sits on an 8,000 sq. foot lot. The home is a 4 bed 2 bath, tile floors throughout and granite tops. Basically it is a durable nice home. It is fully landscaped with sprinkler and drip system and has a full block wall for the back yard. I build a new home and then pull the equity with a HE loan and then use it to finance other projects. I am really uncertain as to what I should do here. THANKS SO MUCH,
Kyle
It depends on your cash needs and tolerance for risk, and your investment goals. If the market will stay hot you can get income and appreciation and net more buy renting and L/O. Lets say you sell w no realtor today and get full asking price with no concessions. That means you get $70,000.00 less closing costs. After your Capital gains taxes are paid, and in a CD @ 2% how much will you have in 2 years? Now, if you lease that home with an option to purchase after 2 years at market value, you will have 24 months payments less taxes plus the appreciated value less taxes and your www.payoff.Now, can anything go wrong? You betcha! Is it worth the risk? Only you can answer that my friend.
Good Luck,
Shawn(OH)
Shawn, or whoever...quick question....I have a good starter home (3/2.5, 1400 sq ft, less than 7 months old). My girlfriend and I want to buy something larger and then rent this out. An investor friend told us...NEVER EVER RENT IT OUT, ALWAYS DO A LEASE OPTION. I understand the premise behind the LO, with the tenants taking better care of the place, but we really dont want to sell in a year or two, mainly because it would be a good place to generate some cash flow, but also because we have not been in it long enough to have much equity. Any thoughts?
Thanks in advance.
Brian
Brian,
I can relate to your situation. My husband and I are building a home, and are discussing what to do with our present home. There is little equity now, but the surrounding area is being "revitalized" in the next few years, so the property values could soar tremendously. It's a gamble, but we know we would come away with almost nothing if we sell now.
By reading your post, it appears you have already made up your mind despite what you have been told. That's the key. If it's logical and the numbers work, then it's right for YOU. No one else can determine an acceptable risk.
Quote:
On 2004-02-25 16:03, suntzu18 wrote:
Shawn, or whoever...quick question....I have a good starter home (3/2.5, 1400 sq ft, less than 7 months old). My girlfriend and I want to buy something larger and then rent this out. An investor friend told us...NEVER EVER RENT IT OUT, ALWAYS DO A LEASE OPTION. I understand the premise behind the LO, with the tenants taking better care of the place, but we really dont want to sell in a year or two, mainly because it would be a good place to generate some cash flow, but also because we have not been in it long enough to have much equity. Any thoughts?
Thanks in advance.
Brian
Kyle,
I am not a fan of lease option, particularly for property owners, and here's why.
Owner sells an option to a tenant to buy the property for X$ by Y date. Owner can't sell to anyone else until either the tenant exercises the option or the option period expires. In the interim, a real buyer could come along but the owner can't sell. Or in the interim, the property value rises above the option price, but the owner must sell to the optionee at the option price and can't sell to someone else at a higher price. Or in the interim, the property value falls below the option price and presumably, the tenant decides not to exercise the option (not to buy the property).