Lease Option - Posted by michael

Posted by SteveS(CPA) on April 17, 1999 at 09:18:23:


I just read your post. You took the words right out of my mouth. Good job!


Steve S

Lease Option - Posted by michael

Posted by michael on April 17, 1999 at 01:22:05:

OK I’m finally gonna do it. I’ve made enough money on my rentals that I want to move from my “working class” house to a better place. I have five units working for me and would like to avoid using a broker to sell my residence. Here is what I am proposing. My house was appraised for refinancing purposes at $108,000. A broker I invited over said it would sell for between 103,000 and 107,000. He figured I would get $96,000 after commission. I want to advertise in the Sunday Paper for lease option. Option consideration $5000. One year option with $400 per month going towards the purchase price. Rent will be $800 per month with lessee paying for all costs of repairs. My mortgage runs $625 per month. I am considering using an attorney to handle the paper work. Suggestions for how the add should run are welcome. I would like to sell the house at $105,000 which is about what comps run. Any suggestions about the figures or how to structure this are apprecietiated. I live in a market that is leaning towards buyers. Also do I just contact a title company to handle the paperwork or what? Is the newspaper the best way to go? Any questions or suggestions are appreciated.

Re: Lease Option - Posted by Bud Branstetter

Posted by Bud Branstetter on April 18, 1999 at 14:55:34:

The sign in the yard is the best advertising. Next go for the ad. I agree with the others on price and credits. Try negotiating addition credits based on additional down or monthly payment. Rent credit initially not discussed, then $200 credit for each additional $100 monthly. You can also have clauses that they don’t get the credit unless the payment is on time.

You can also do something similar by doing a contract for deed with a balloon after the first year. You can also balloon it by making the interest rate jump 2 or 3 %. Sometimes a contract(actual sale) will bring a down payment greater than the lease option.

Just a philosophy, but I prefer to find someone that wants to buy first then figure out how to get them in the property.

Re: Lease Option - Posted by JPiper

Posted by JPiper on April 17, 1999 at 11:17:41:

I’d probably be more toward the $115K type of area in terms of price. While I don’t know your area, I think your payment is too low?.should probably be more like $1000+. I think your rent credit is too high?I probably wouldn’t credit over $200 per month. And I’d maintain some flexibility on the option consideration?.although $5K is probably OK.

The advice you received below is good. Get a course.


Re: Lease Option - Posted by DanM(OR)

Posted by DanM(OR) on April 17, 1999 at 09:04:36:


Read all the articles here about L/Os. They will give you a lot of the information that you are missing. Then I would advise you to buy a L/O course before you do one of these. It will not only save you money, but make you some as well.

I think you will find that your asking price is low. Lease Options usually get a premium for the flexible terms.

Let’s say you give a 12 month lease option on a your home to the tennant/buyer. You should at least tack on the “projected” appreciation during the period. In my area the homes are appreciating between 3-10%($3k-$10K per year). A good appraisal will give you those appreciation numbers.

You may still want to add a couple thousand more on the the backend for your flexibility and “risk”.

I have given only one example that I learned from Bill Bronchick’s course that will make you more than you were going to ask.

Buy a course, compared to what they will save/make for you, the cost is peanuts.

Best of luck!

Dan Matejsek