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.

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.

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