What Numbers For This Deal
How would you handle this as a L/o
Have a home FMV 75K, I paid 48K and payments are 407.00 for the 32K I still owe. Market rent is $775.00 . Area appreciates about 3% a year.
What would you ask down, Rent and selling price?
Thanks for all replys
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I'd try to get market of $775/mo, sell for $75K, and as much down as you can. I would ask them, "how much do you have to put down?" On a straight rental you would want at least one months rent deposit, so I'd say bare minimum $1000 down for option.
I understand the property will be worth more after a year, assuming it continue to appreciate, but I have difficulty getting tenant buyers to see it that way.
Am I missing something? Still dont see why the high interest in L/O.
I am in a great rental market. It seems just renting is better. Get same rent and can go up about $25.00 a year. And I get the apreciation. Is L/O only used if a bad rental market or house hard to sell?
L/O work well in Buyers Market.
Also, some folks want to get the $ and go on to another deal. Many don't want to be landlords / property managers.
If you sell it next year for todays FMV then the option money shouldn't be applied to the purchase. Now that is a hard one to get them to swallow.
If they want the option money to get applied to the purchase then the purchase price will be the FMV at the time that they purchase it. (Or as close as I can guess that it will be)
This is the fair method and I have had no problem getting people to see it.
On this deal I would:
Get about $2000 down plus first month lease.
Market rent? No way! Take it up a $900 and give them a $250 rent credit each month the payments are made on time.
One of my goals is to have them in a position where at the end of the term they have enough down (Option $ + credits) to get 95% financing.
thomasgsweat,
Why offer rent credits at all? You can get market rent, maybe a little more, and then on a separate check because you have a separate purchase contract, and because you'll want to show the eventual lending institution proof of down payment, you make up the difference. You might try only offering rent credits if they ask for it, however. If you use this method, you can collect the same $125 per month extra, and credit them with a lower amount, Say $200 as non-refundable option credit, but only if the lease, and the installment are made on time.
Otherwise I agree with you. Sell for future FMV and shoot for as much "Earnest money" (Non-Refundable) up front as you can get, At Least 2-3% minumum.
Just offering a little something different to ponder..
Good Luck,
Jeff [ Edited by jeff12002 on Date 09/29/2003 ]
Same Same.
I do collect the money in separate checks most of the time, although sometimes I don't. But my goal is to get to the end of the term and have all of the money all ready paid for DP so that they can get financing without more cash. All they need then is a credit score. I actually work it out so that I know what I need to get the 5% by the end of the term and arrange the Option Consideration and monthly credits to achieve the 5% or a little more.
When making the deal, if I have to, I will take more of the monthly rent payment and turn it over to the rent credit side.
It's all in the numbers. I may do that if I have a skinny cashflow and want to raise the rent a bit. Rent up $100, credit up $150. Enticement to pay the higher rent.
You can work it anyway that you want. I have a goal that I am trying to achieve and that is selling the place to the T/B. But I also have an amount that I need to get on the backend. If necessary I will stretch the term to 2 years (not often) just to ensure that I get the bucks that I want out of the deal.