Posted by Russ Sims on January 18, 2001 at 02:24:43:
Hi Dave: In my area of Washington State (Tacoma area) I’ve seen quite a number of new homes available as lease/options…This especially seems true in spot areas where builders have kind of over built…there’s too many new homes on the market so it’s not uncommon to see lease/option signs in the developements…smart move: Lease/options don’t have nearly the competion that a home requiring new financing would, and builders can get almost immediate occupancy and be virtually guranteed a premium selling price.As to whether it’s a good idea in your case, it just depends on what your holding costs are for the property. If you can wait to pay off new construction debt and get a positive cash flow from your t/bs, why not?
I would like to build some homes , your basic three bedroom two bath 1800sq ft . Then lease option or maybe owner contract . The competition seems so great for a fixer upper that maybe new construction would not be a bad place to start . Thanks Dave Hasselberg Washington State
Lease optioning new homes is a great Idea. You can probably get 5-7% as option money as deposit for a new home. The only problem I see is the construction financing. The spec homes I build I can only use the money for 12 months. For a lease option I would want at least a 3 year balloon on the note. I have explored the option because if you do watch your costs you can build it for 75-80% of Appraised value. I have gone as low as 70% but not much lower. Time is a factor. It takes me 4-6 weeks to get a building permit and 3 months to build a 1800sf ranch home. Good luck and keep us posted.