Fair Down Payment On A Lease Option
i am trying to come up with low money down methods. of course lease option being one. but what is the smallest fair amount to put down. i figure i want to put a small amount down and come up with the larger down payment when it is time to exercise my option. one more question. can a lease option can be stretched out for as short or as long of a period that both parties agree on, even 3 or 6 months?
Hi Kimesha,
I am a newbie in the Philadelphia area also. From my experience I would say 3-5% is fair, and to your second question, I think a L/O can be for as long or as short as specified in the contract, but most sources I have come across have stated a lease option should typically be for at least two years.
You will have a hard time getting anything more than 5% on a lease option, the people that want a lease option are usually the ones that cant get bank financing and most of them dont have a ton of money saved or a bank would somehow finance them.
This is also why it normally is two years, the T/O needs to build their credit worthiness in order to obtain financing at the completion of the lease. Also, a small initial down payment (of course we do not call it a "down payment"
is one of the main reasons for a seller to choose the lease option method, this normally being 3%-5%.
Take care,
[addsig]
I will usually take 3%, depending on what I am into the property for then I have them work with my trusty mortgage broker and she helps them with credit and almost can guarantee financing in 6 months period.
i have them under contract for 3 years because we have to pay tax on the "option fee" when the third year comes. 3 to 5 percent sound right even thought you try to get as much as you can. This fee is non-refundable, so we may have some issues later if Optionees want those fee back.