Lease/Option Question - Posted by Hector

Posted by Bronchick on December 18, 1998 at 14:14:24:

Good to mark it up, but I would not necessary trust the “appraised” value. You may be able to get more, regardless of appraisal or average price per sqft.

For example, if the neighborhood is $80 to $100k, I would ask for $89,900. Buyers rarely dicker much on the price of lease/option homes.

Lease/Option Question - Posted by Hector

Posted by Hector on December 18, 1998 at 10:52:14:

I just bought (assumed the mortgage) a house for $7000 less that what it was appraised for and we close the first week of January. I asked the seller if he would consider L/O but all he wanted was some cash and I could take over payments. I talked him down $7000 from his asking price which was the appraisal amount and now I have a tenant who is interested in the house rent-to-own. After figuring everything out plus an increase in taxes, I should have a positive cash flow of about $50 to $100 pm. I took the appraisal value and added 4% for future value and told the prospective tenant I would sell him the house in 12 months for $82500 which he sounds very interested in. I also told him we can work something out like make an additional payment (non-refundable) each month as a down payment. Question: Am I going about this in a right way? I’m very new to REI and if I can get some advice from you seasoned investors I would appreciate it. P.S. The house is in Tucson and I got the 4% figure based on what I read in the paper of the housing value going up.

Suggestion - Posted by Bud Branstetter

Posted by Bud Branstetter on December 18, 1998 at 16:45:00:

Ask for option money up front from your tenant buyer to assure he buys. The amount to shoot for is 5%. The less the money the less they are likely to complete the purchase. First and last months plus security deposit is ~3% so call it option instead. You will also need to do things to assure title will transfer, but that’s another discussion.