Rent to Own - Lease Option Forms and Questions

4 Replies

Do you have to set a purchase price dollar amount in the lease option.  Can you state that the purchase price would be the average price between two independent private fee appraisals done at a set point in the future?

I have a condo that's 945 sq ft  2 br 1.5 ba rent will be $700 if I did a regular lease--should rent be increased due to the rent to own offering and if so by how much?

Do you always have to take option money?  This unit in a lower end where people don't usually have extra money for large outlays.

Any other comments would be appreciated on the how to's of this would be appreciated.

Much thanks.

@VAL A.  I believe the whole point and benefit to the lease option is you get the option money .. making sure it isn't a downpayment but rather option to purchase... use an attorney.  And yes, don't do it if you can't take some cash in on the option, and then also have a solid return on reselling.  Otherwise, just rent it ... and take the cash flow.

Medium bridge logo with tagline 01Nathan Brooks, Bridge Turn Key Investments | 9132674114 | | Podcast Guest on Show #232

Regarding the sale price, one of the main benefits to the buyer is that they've locked in their price for a predetermined time period. It is in your best interest to inflate that price a little bit to account for possible appreciation. When the time comes to exercise the option, if the property has appreciated more than you projected, they are getting a good deal. If it has not appreciated they may choose not to exercise or you get a good deal. That to me is the backbone to any option concept.

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If you are in San Diego, I would get a CMA from an Agent and a Rental Analysis from a Property Manager.

Then sign a 1 year lease with possible extensions of market rent.

Then an option to purchase with 3% option payment (non refundable), strike price can be a trigger of either X dollars or new appraisal whichever is higher.  Appraisal is to be the average of A and B appraisers.

I would have a RMLO in San Diego do the underwriting for the deal, even if the deal is a straight option and a lease.  He knows due on sale issues and the Ability to Repay Rule very well.

Here is a video he and I did a while ago

There are so many friggin lawyers in Cali I would never do a LO or Seller Financing Deal without a RMLO.  the penalty of violating the Ability to repay rule is 36 monthly payments, down payment, lawyers fees, and court costs.  Like $40K on the cheap side.

Medium banner reiskills 997   copyBrian Gibbons, REISkills | [email protected] | 818‑400‑3046 |