A Real World Deal....Making an extra $100K on a deal in NZ

I was living in NZ and renovating properties from 2001 to 2010.

Here is a real story about lease purchase.

Background.....My wife had a property she bought in 1992 for $110,000.00, and in 2007 it was appraised for $630,000. 

It was in a trendy, "arty" part of town every hip urban 30-something wanted to be living in and partying in.   It was in Ponsonby, Auckland, NZ.  You non-Kiwis can readbaout it here...http://en.wikipedia.org/wiki/Ponsonby,_New_Zealand

So for this $630K rental, we decided to test the waters and we both wanted to net $630,000.00. 

We tried a friend that was an agent, and she could not get offers on this immaculate home over $530,000.00. 

Then we tried another agent, and no luck. Not one low ball offer! 

And property slump of 2008 was not even in full swing yet! 

I was reluctant to get involved with my wife's affairs, this was her "baby"; but I asked her if she would consider a "rent to own " on the property. 

She said yes as long as we netted $3000 a month. 

So I marketed for a tenant buyer, and found one willing to do this: 

• Lease $3000 a month for 12 months, extendable and renegotiable. 
• $2000 non-refundable option payment toward the purchase price
• $400 rent credit toward the down payment per month (for on time payment) 
• Exercise Strike Price at $639,000.00 
• Tenant Buyer had 2 years to get new financing. 

As it turned out, the buyer could not get financing, and then asked a great question, 

“ If I could get a buyer for this place at $639,000.00 net to you, would you pay me back (refund me) for the 16 months of rent credit I have been here paying in, plus the $2000 option payment back? 

So $400 x 16 months = $6400, 
and the $2000, 
was $8400. 

We said YES! As long as we netted our number. 

The deal closed netting us $639,000.00 – 8,400.00 = $630,600.00. No agent’s commission! 

Not bad for a tight market! 

Lesson, “always listen to your tenant buyers’ suggestions!” 

Brian has made money for his company in lease purchase consulting since 1986. He coaches select students for 1 year coaching agreements in every state except Texas. Brian Gibbons, coach of Lease Purchase – Rent to Own Consulting –