When Optioning A Property How Much Should I Aply To The Purchase Price?
If the going rent is $1000 a month and I lease option and charge $1300 should I credit $300 towards the purchase price or should I do 1/2 that? I am already getting a high price for the property. Will I be able to rent/lease it faster if I give a credit? Is there a hard and fast rule or do we make it up as we go?
Thanks for the help.
I do a lot of L/O and I give as little as possible... on that price range not knowing all the details...$100/month R/C
Thanks Dave
So you give as little as possible. Does this work? I am thinking of trying this in a very blue collar area of town. How much over fm rent do you charge? Thanks for the help.
It all depends on the numbers and how bad yoou need to get someone in the place.
Depending on how it all looked I might give $100 or I might give $500. it depends on how much you got into it for and what you want to get out.
100-150 sounds about right
Sorry for the dumb question.
So we're talking about $1300 being charged to the investor by the home owner? And the $1000 will be the amount charged to the person who is sub-leasing?
thanks
I have a 3 step program that I offer people right up front. It's very simple and it shows people that if they pay more each month, they will receive more off the backend.
The first program is no credit each month, 2nd the pay like $50 bucks more and they receive $50 bucks off each month (I know it's a wash but the way I explain it, it makes it sound like they are getting more out of it), third is $100 bucks more, etc. The great thing is that in any of those 3 programs, your final profit, including option money and purchase profit will still be the same, it's just that the perception and monthly income to you will be higher. Of course it's a great way to give an incentive for people to pay on time.
If you live in a higher area, then you could possibly bump up the prices, but always remember that making $50 bucks a month is better than making none at all, especially for doing hardly anything. So don't get greedy.
The Solutions Kid
[addsig]
Thank you to everyone for the input.
Yehoshua30: The $1000 a month is fair market rent and I will be charging my renter/buyer 1300 a month for the option. I wanted to know how much I should credit to them. I was just wondering if it will make it easier for them to get a loan if they have credit toward the purchase price. Would you include the option money in that?
Also do you revoke the option for 1 late payment? Thank you for the input.
Quote:
On 2003-10-07 12:32, JamesStreet wrote:
Thank you to everyone for the input.
Yehoshua30: The $1000 a month is fair market rent and I will be charging my renter/buyer 1300 a month for the option. I wanted to know how much I should credit to them. I was just wondering if it will make it easier for them to get a loan if they have credit toward the purchase price. Would you include the option money in that?
Also do you revoke the option for 1 late payment? Thank you for the input.
Hello,There are so many ways to do l/o's it all depends on what you are looking to do. Say they are giving you $200 over market rent you could give them a rent crdit of $250-300 and adjust there purhcase price to cover there rent credit but don't go to high over fmv , unless they have a real long lease. Use the rent credit as a selling point. It also might help them get qualified for a loan because of appreciation. On most l/o I would credit there option payment off the purchase price. Hope this helps.
I set the selling price at the future FMV.
If we go with current FMV then the option money doesn't get applied to the purchase price. And neither would there be rent credits. I would have to make up the appreciation through the option money and extra rent.
It looks a lot better when the money they pay goes to the purchase. I structure them so that the total of option money and rent credits hits a little over 5% at the end of the LO. That means a 95% loan makes an easy purchase for them.
I won't sell a house two years from now for todays FMV.
Thanks to everyone who commented on this post. I am a newbe and I was wondering what should be charged myself.
This site is alot of help. So much infomation