Posted by Clair-MO on December 19, 2004 at 10:09:20:
Marc,I am totally confused but that isn’t nothing new my wife tells me that all the time! There are several factors you need to take in consideration:
- What is the asking price for the town house?
- Is the seller motivated to sell to you at a discount price for the home?
- If the rental market is not good in your area what makes you think it will become better with a 50% of the monthly rent being applied to the purchase price?
- What kind of rent per month are you expecting to get so you can apply 50% toward the purchase price?
- You stated “After a year the renter decides to exercise the option” so you are lease option with a tenant buyer on this deal, right? Let’s say you find a tenant buyer to put into the town house and he has a terrible credit. A 12 month option is not feasible on someone who has bad credit. I would suggest doing a 3 year lease option with a possible additional 2 years if needed to help out the tenant buyer straighten out his credit problems so he can do a loan to cash you out. The key is knowing how to screen tenants and get someone who has damaged credit but can be straightened out in the 3 years.
- What is you expected cash flow positive or negative? Hopefully not negative cash flow! The most credit that I would be willing to give a tenant buyer is $50.00 to $100 provided the rent is paid on time every month.
A question for you, Marc: Have you thought out how much money you can take in per month without giving any credit toward the purchase price? By giving a credit you are taking away from your profits month to month but do what you have to do to make the deal happen!!!