Hi. I have a potential lease option deal in north Florida, but I am not sure if this makes sense. The house was built in late 1980s, 2300 sqft, 3/2 with a water view (not water front). The seller is asking $325,000 purchase price with $1800 monthly rent (from tenant buyer).
He also wants to split the appreciation over the 3-5 year period.
Cash flow may be as little as $0.00 and as much as $200 per month, and I am not sure if I should be splitting the appreciation with the seller. Do you think $2000 per month is too much for a tenant buyer?
What do you all think about this deal? A good or bad lease option deal for me?
It depends on what the market will bring?
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Thank you for your reply.
Personally, I wouldn't do the deal for 2 reasons:
1. Doesn't seem like enough rent to cover the costs. I don't know the expenses in that area, but $1,800/mo doesn't seem like enough. Either way, you're admitting CF of 0-$200/mo. I suspect that may be without even considering vacancy.
2. I would not split appreciation with the seller. Giving him/her the cash now and value for the appreciation is a riskless win-win for them that is not necessary. Besides that fact that determining appreciation could be a major issue in 3-5 years, Id tell the seller that if you are going to own the property you're taking the risk and get any appreciation.
Just going off what you're saying in theory you could get zero cash flow for 5 years and then STILL have to cut the seller a check for appreciation? No way I'd do that.
Thank you for your response. That is what we were thinking but needed some confirmation. Thanks.
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