Possible Lease Option - Posted by michael


#1

Posted by JPiper on January 09, 1999 at 11:22:29:

Ray:

I can?t tell you what other people advise or recommend.

I have NEVER sold a house via a lease/option that has ANY terms other than the tenant/buyer doing ALL the repairs. Is this hard?? No. The tenant/buyer is a guy who wants to own a home. I want him to own a home. One of the privileges (?) of owning a home is that you are responsible for repairs. It?s not even something that gets very much discussion. I don?t know where you?re reading that a tenant/buyer should only do up to $100 in repairs?.but if I?m the seller, it ain?t going to happen.

If I were the buyer this would be an attractive term of course. And perhaps this is what you?re referring to. And yes, if I were successful at negotiating this particular term with the seller, I would still insist on the new tenant/buyer making all repairs.

By the way, I generally agree to do all repairs when I lease/option a house. You?re right. It?s a selling point. I don?t even try to limit what repairs I will do.

JPiper


#2

Possible Lease Option - Posted by michael

Posted by michael on January 08, 1999 at 20:03:08:

As a newbie to lease option I would appreciate any input. Here is the situation. i want to sell me primary residence. FMV is 110,000. I will sell the house for 105,000. Loan amount 85000. PITI is $630 I was thinking about lease optioning to a tenant of mine on a one year lease option. Lease option consideration $1000. Payment $800 per month. Tenant will recieve credit of $200 per month. Option two is a lease option for $2000 with the same credit. property in my area is appreciating at about 5% a year. Is this a good deal for all. I also want to make the tenant pay all utilites including water, garbage, and sewer, and change this over to their own name. I also want the tenant to pay the first $200 of any and all repairs. I just want feedback to see if this is a good idea for all.
Thanks,
Mike


#3

Re: Possible Lease Option - Posted by JPiper

Posted by JPiper on January 09, 1999 at 03:05:27:

I think lease/optioning your home is a good idea, but it sounds like you could use some education on the particulars.

First, if you lease/option a home you should be able to get MORE than FMV, not less. I would suggest at least $115K, or perhaps $120K. The reason is that attractive terms make your property more valuable, if not to this particular tenant, then to another tenant/buyer.

Next, in my area, I could easily get $5K for an option, perhaps more. This represents a little less than 5% of the price. I wouldn?t take anything less than $3K. Just so that you know?.I don?t take less than $3K even on properties of half this value.

Your monthly payment looks way too low to me. I would say this payment should be at least $900-$1000. Check to see where the rental market is in your area. But keep in mind that a mortgage payment for a house of this price level with taxes and insurance is going to be in the $900 range.

I would make the tenant/buyer responsible for ALL the repairs. Afterall, he wants to own a house, not rent one. Let him act like an owner.

Utilities should not even be a question. Even renters should be responsible for these?.let alone a tenant/buyer.

If this particular tenant can?t afford these amounts, get rid of them, and get a new tenant/buyer. Lease/options are popular with people?there should be plenty of demand.

In short, the deal as you describe it sounds like a great deal?..for the tenant. Raise your prices at least as described above.

JPiper


#4

repairs - Posted by Ray Richardson

Posted by Ray Richardson on January 09, 1999 at 09:37:53:

There seems to be a fairly wide array of opinions on repairs in l/o deals. Jim, you don’t find it hard to get tenant/buyers to agree to ALL repairs? I’ve seen it recommended several other places that anything up to $100 an occurrance is covered by the tenant.

When you are in a sandwich position, do you tell the seller you’ll be responsible for ALL repairs, since that is the agreement you plan on making with your tenant/buyer? I think this would make an L/O an easier sell for sure, but as a newbie, I’m nervous about not finding tenant/buyers who will agree to those terms. I would find it very helpful if others would share their experience in this area. Thanks!

-Ray