Tenant Wants To Lease W/option To Buy How Do I Set This Up?
I bought a 10 acre lot a couple of months ago and put a mobile home on the property. It's now all set up and the first person to look at it wanted to know if I would be interested in leasing with an option to buy. How do I go about setting this up? How long do I lease for? Do I get an extra $250.00 a month as the option? Do I have to save that as their down payment when it comes time to purchase? Do I get a down payment first? Any help would be greatly appreciated. Thanks in advance
Ron LeGrand has an excellent course on selling with options.. go on the internet and see if it's availible. I bought the whole course for about $200 , It's alot of valuable info... Good luck!
I agree with the points that edmeyer has just stated. Yes, the consideration amount and the terms can be anything that both parties agree to. However, I would say that most REIs who do lease options do not like to extend past a period of two years and the majority like to see one year.
Lease option consideration amounts will range normally from 3% to as much as 10% of the agreed upon purchase price. Most of us will not do a lease option unless this option consideration is given at the time of the signing of the lease option. If the prospective tenant buyer has nothing in the way of an option fee I would say nine times out of ten that you are spinning your wheels. I have seen some investors willing to take the option consideration money over a period of 3-6 months but usually there are some good reasons to do this.
I would hope that you have intentions of making a positive cash flow whether you just rent it or lease it with an option to buy. You should be able to get the upper end or a little over the market rent in your area when you do a lease option.
Example:
one of my properties has a mortgage of $764.25 per month. I offered the tenant buyer two different scenarios as far as rent credits.
1. Monthly lease payments of $995.00 with no rent credits.
2. Monthly lease payments of $1,400.00 with a monthly rent credit of $500.00 toward the purchase, if exercised.
Hope these ideas help you. Good Luck.
Dave
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"Opportunity is missed by most people because it is dressed in overalls and looks like work." (Thomas A. Edison)[ Edited by dealfinder on Date 12/22/2004 ]
Dave
Thanks for your response. Under your scenario the $500.00 rent credit. What exactly do I do with that. Do I set that aside and use it at the time of purchase for their down payment. I'm a little confused by the process?
arseknow