Posted by Geoffrey Faivre-Malloy on December 14, 2000 at 16:45:34:
This also happens to be the way builders handle construction of new homes. When I was having a new home built, they wanted close to $12,000 for the upgrades (which was non-refundable once they purchased them).
G-Man
T/B wants a say in the rehab - Posted by Alan-Baltimore
Posted by Alan-Baltimore on December 14, 2000 at 11:57:21:
I am in the middle of rehabbing a property in a decent neighborhood for my first lease/option. While the work is being done, I put a Rent-to-own sign in the window just to see if it drew any response. I?ve gotten a few calls and now have a very interested T/B (single female professor at local university). I showed her the property even though the contractors are only few days into the drywall and painting (all the other mechanical work is done). Her boyfriend was with her and seemed very knowledgeable about renovating. He suggested that I leave the floors alone. (I am going to recarpet and tile as needed). He wants to put in higher quality than I have picked out. In return, he wants a credit for the money I?m saving.
My only problem with this is the chance that the T/B doesn?t exercise her option. Since I propose that the credit be used against the purchase price, I can foresee that if she leaves the property, she might want the cash value of the better flooring.
Here are the choices I see:
Let her put the floors in, give her the credit and have her sign a release that if she don?t purchase, she loses out.
have her pick out what she wants, pay for it my self and add the extra cost into the sale price
Tell her it?s my way or the highway (LOL)–I?ll put down the floors as scheduled and when she moves in, she can do whatever she wants. The lease states that any improvements become property of the landlord.
Has anyone else run into a situation like this?
Any comments would be appreciated.
Re: T/B wants a say in the rehab - Posted by JPiper
Posted by JPiper on December 14, 2000 at 15:15:05:
I had to chuckle when I read your post! My first thought was that had you gotten high enough option consideration they wouldn?t have any money left for better carpet!
First, let?s correct a misnomer. If I spend $2000 on carpet the value of the house doesn?t go up $2000. If instead if I spend $1000 on carpet, the value of the house doesn?t decline $1000 either. Most repairs done to a house don?t affect the value dollar for dollar. So why would you credit something against the house?
Next, I wouldn?t leave the carpet and tile for them to do. They may not do it at all, in which case you?ve gotten yourself off into a quagmire.
The way I would handle it is that if they want an upgraded carpet, I would simply have them give you a check for the difference, and then install it yourself. The price of the house would remain the same. Remember, the value of the house is based on comps, not based on the type of carpeting. I would not give a credit of any type for this?.since this may later lead to expectations on the tenant/buyers part.
If they want to upgrade certain things in the house, that?s great, they do it at their cost (for the upgrade) and it will be easy to do right now. I certainly wouldn?t spend extra cash and tack it on to the price of the house. How do you know they will exercise? If they don?t, you now have spent more on the house that you might not have spent on a different tenant.
JPiper