Posted by Craig-SoMD on July 04, 2003 at 23:43:32:
It is a good deal for the tenant buyer because they are able to get into the house they will be buying, possibly before they may have the credit or cash to close right away. They will be paying a fair rental rate. Often they will be getting something every month(so long as they pay on time) that will be credited toward the purchase price. And the price you lock in today, although more than today’s price, should be less than FMV at the time they intend to buy, a year or two down the road.
Here is an example where I just put a tenant buyer in a property. My locked in price - $167,000. My tenant buyer’s price - $197,000. The payment I make - $1225. My TB’s payment - $1450. Monthly on-time credit - $500, first year only(possibly $6000). Up front option consideration - $6000. Term - two years. FMV in two years based on very conservative appreciation rates for the area - $220,000. The very least I will make on this, total, is $24,000, and I am making it in upfront option consideration, monthly cashflow, and backend profits. If they don’t follow through with buying the place, I will make even more money on this deal. And I know it is a great deal for the tenant-buyer.