Newbie, Considering L/O
My wife and moved into a condo 4 months ago and have had our previous house up for sale for 6 months with no luck. Our initial asking price was too high and the market has now dried up in our area. We have fired our REA and put up a for rent sign. I have some knowledge of basic real estate investing principles. I received a call from someone who may be interested in either renting or doing a lease option. I had not considered the particulars of a lease option so t/b is going to go through the house and, if interested in l/o, we will work out the details.
At last re-fi 2 years ago house appraised at $140k but has now sat on market for 2 months at $150k, 2 months at $140k, and 2 months at $130. I was planning to rent for $850 a month w/ $1000 security deposit.
Considering the following for a lease option...
$3000 Non-Refundable option, used to reduce selling price if purchased
Give t/b the option of $850/month with no rent credit or $1000/month with $200 rent credit
12 month lease, can purchase anytime at $127k after option reduction
Considering allowing to renew for additional 12 months with purchase price increasing to $132k after option reduction
Do these terms seem reasonable? I understand that my option payment is lower than the 3-5% usually stated but I am in a hurry to get someone in there so I am not longer making 2 mortgage payments with no rental income.
Another newbie question, are rent credits usually given as a reduction in selling price or set aside to add to the t/b's down payment? Also, would it be in my best interest to go through a real estate attorney to draw up a contract?
Any help is greatly appreciated
Thanks,
Matt
hello, is your area depreciating??i would get very strong comps or even spend the money on a full blown appraisal and start from there..how long your l/o is will determine the amount of appreciation to add to the final sales price(selling today at tomorrows price)..your option money and monthly positive is almost arbitrary, as it comes off your purchase price, if that is how you want to structure your deal..your terms with l/o depends how you want your self/market made equity paid to you..either upfront, middle, or at closing-you just need to decide which will work for you the best and if your market will hold it..heres a nice low dollar introduction to this technique.. www.l2p.com i hope this helps out a little..pm me if you like and maybe i can help you ..
regards-pat