Rule Of Thumb On Lease Option
Hey All.
What is the general rule of thumb on option money and lease on any random single family home.
Is it safe to say 5% of appraised as option and 1% of appraised as lease w/20% credit?.
ex:
$150,000 single 3/2/2 pool nice shape.
$7,500 option
$1,500 lease
Any guidelines you all use?
THX
We use 3% as option and 10% above market rents as lease.
Markets vary - mine is tough right now and tenant buyers have a lot to choose from.
Good question! I'm about to do a l/o but market rents for the area range from 900-1100. So what should I take the 10% off of. Maybe $1000? Since it is middle of the road.
cmyke,
Here's the way I would do it.
I would ask for a $5000 non-refunbale option up front and $1,300 lease per month with a $200-$300 credit going towards option at purchase time in 2 years.
This way Lessee has a total, assuming a 2 year lease, of $12,200 credit off purchase price. The purchase price in two years should be adjusted at 5-7% appreciation per year from today's FMV.
Example FMV today is $110,000. Lessee's option price in 2 years is $125,939 - (minus) their credit of $12,200 = $113,739
THX