Confused On Leasing With Option To Buy
I have someone interested in leasing with option to buy a home I have for sale. I would be interested in doing this but I am totally confused on this lease with option to purchase since this will be my first one.
How do you determine the down payment?
How do you determine the rent and how much goes to the principle and how much goes to the interest? Do you have to decide on an intersest rate?
Does the bank where I have the loan through have to know anything about this?
Do you normally have them pay the taxes and insurance? Would I still receive the tax and insurance bill and then send it to him to pay?
I think my last questions, what is the normal term of a lease with option to purchase, like five years?
Thanks.
The national average is 5 percent in Option Consideration. I usually get 6 percent. Never take any less than 3 percent. Intrerest and principal are irrelevant--you just charge a little higher than market rent. I do all my L/O Contracts for one year. The last thing you want is to have it ruled that your T/B has equitable interest, so never have him pay the taxes and/or insurance. Also, the IRS says that a L/O for 60 months or longer is an installment sale,. so that is a definite NO NO for you to give a T/B (but great to ask for from a Seller). Rental credit is good for giving incentive to pay rent on time (as long as it's not outrageously high).
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