Re: Rent or Rent to Own ??? - Posted by Brent_IL
Posted by Brent_IL on October 22, 2003 at 05:22:12:
It?s nice to acquire a free bathroom. It?s not so nice if the improvement is shoddy. A subsequent buyer probably wouldn?t be too thrilled.
If you are going to allow her to work on the property, insist that the work be done by licensed and bonded contractors, and that failure to pay a mechanic’s lien within 30 days of billing is a material default of the option agreement that automatically cancels her right to buy, but does allow her to continue to lease from month to month. I really prefer PACTrust-type trust arrangements for this kind of thing, but that?s beyond the scope of the question.
In my area, the long-term rent ratio for entry-level SFH?s ranges around eight-tenths of one percent of market value. You?re getting 1.3%. If this is normal for your area, I agree with Randy to shorten the term and bump the price. I?d try a $75,000 strike price with a credit for approved repairs against the purchase price. I also agree with Doug that you could ask for more rent in exchange for a larger credit off the option price.
If I could get 1.3% on a straight rental, I wouldn?t want to take a chance on the option being exercised. I?d put the property in trust for my kid?s kids. But, that?s based on rents in this location.