Posted by Innovator on February 14, 2006 at 22:00:12:
In a properly constructed land trust the tenent is a beneficiary in the trust and is signed on a triple net lease and thus the IRS says he is entitled to take the tax deductions (just like a homeowner). This gives him the ability to pay a higher lease payment and assures you a positive cash flow.
Lease Option Question - Posted by Don
Posted by Don on February 14, 2006 at 12:24:18:
Have a question about the rent to ask for on a sandwich lease option. Assume that a property (SFH) has a fair market value of $500,000. Current rentals for that type of property are $1,700. Assume I can rent the property from the owner for $1,600.
When searching for a tenant/buyer for the property, should I base my rent: (1) closer to the competitive rents in the area (say $1,950 with a small amount credited toward purchase), or (2) closer to what the tenant/buyer would be paying if he/she had a $500,000 mortgage on the property? (I know this gets to the question of whether the t/b has a “renter’s” mentality or a “buyer’s” mentality.) What’s the advice from those who do it? Thanks.
Re: Lease Option Question - Posted by Ken
Posted by Ken on February 14, 2006 at 16:45:19:
The t/b has a buyer’s mentality but maybe not buyer’s pocketbook and that is why that want to L/O from you. The only buyer mentality they may have is in the form of their Option fee. Option fees are from 3-5%+ (more if you can get it). Remember that it is still “Lease” or "Rent"to own so usually you cannot go “too much” higher than market rents. If markets are $1700-and you can get that or a little more and it is more than what you are paying the seller–be happy!!! Your big proifts are on the front end and back end. Hope this helps