Need Help In Rent To Buy Terms For My Own Home
Hi, Everyone,
I am new to this and this is my first post. Any assistance is appreciated.
I am selling my apartment at market value of $650k. Someone approached me for rent to buy option. They intend to stay for 1 or 2 years before buying. The market rent is at $3500 a month. Could someone help show me how to structure the terms?
Thanks
Michael
Well I think the situation would depend on how motivated you are to sell. But here are some steps you should follow:
1. You need to get two contracts, a lease agreement (rental contract) and an option to purchase contract. I personally recommend seperate documents, but that is just my preference.
2. You need to get funds from buyer as option money, we usually do 5% minimum, but try to get as much as possible and sometimes get up to 10% or more.
3. We also require a security deposit on the Lease.
4. We sets our lease rates at 10% above the market price and give them around 110% credit at close. So using your numbers it would be $3850 a month, with a $385 a month credit towards downpayment at close.
If they do not take their option, they only get the security deposit back. The 5 to 10% option money and the additional rent, including rent credit are yours to keep.
Good Luck.
Hi, dnvrkid,
Thanks for reply. It is very helpful. I have a couple more questions.
1- What asking price should I ask? Since the sale will happen 1 year later, should it be a projection of the market value at that time?
2- Would the terms be different if they want a 2-year lease?
Thanks
Well to me $650K is plenty for an asking price - just kidding. It truly depends on where you are located and what the appreciation has been in your area. It is not uncommon to ask for 5% over market PER YEAR as an option price.
We don't change our terms, and we only offer a 1 year lease, with the right to extend, but at different terms, like a 5% increase in lease payment while only getting the same amount of credit.
If we are L/O (renting to own) we want that property to move not for them to not take their option at the end of two years. But we never mind keeping the option money and starting over again.
Have you talked any terms with the buyer? Why are they wanting to L/O instead of buy it outright?
It will basically boil down to the buyer will want to put down as little as possible, with as cheap as rent as possible, for as long as a lease you will give them. You want the oppisite, and will have to negotiate something in between.
Has the property been on the market for a while? What are your goals? and will you be able to obtain financing on another place? or was this a rental?
Good Luck.