What Are My L/O Options?
In the process of purchasing a home that may not be a realistic rental but great potential for lease option. I could get $900 rent for it but according to the pro-formanator (which is an excellent tool) it will be too tight to manage. If I raise the rent to $1000, I get a green check but I will be out of the market unless I L/O. If I L/O, can I ask for an upfront low down payment AND ask for money on top of the monthly rent as additional d.p. or should I ask for one or the other? Would also appreciate any ideas on how to make this deal more profitable than I am thinking. Thanks in advance.
Purchase Price: $87,500
Will sell for : $125,000
D.P. that I'm paying - $4500
Will ask for $5000 upfront+ $900 rent per month and $200 towards d.p. per month.
Would this be a good deal for my buyer?
In my humble opinion, a lease option is the only way to go when dealing with sfr.
In addition, 5k is much to small a downpayment, especially in your market of Hi. No less then 10k down, you need to allow for the multitude of problems that may happen. Remember, once in it's hell getting them out. 10k will give you a better cushion in terms of legal and repair costs. And why not offer to sell the house at the prevailing rate? After three years your house will have appreciated in value; why sell it at today's market rate three years from now.
At least put it out there to see if your potential tenant will bite, it doesn't have to be a deal breaker. At the very least, effectuate a middle ground in terms of your selling price, don't just give your home away. In any event, ask for 1200 per month offering them 50% credits towards their downpayment. Don't be shy, remember this is your investment, place value on it and do it with a straight face and a firm handshake.
Thank you Stan. Very big help.