Housing Appreciation forecast

7 Replies

Hello BP members, 

I have a couple of quick questions about a rent to own deal I am about to get into. I have recently purchased a an investment property in Hamilton Ontario and I put an ad online to rent it. Someone contacted me asking me if it was possible to rent the house for a year and buy it after from us. We suggested the rent to own option and will meet with the person tomorrow. How do I know an estimate of future home value appreciation? How do I know the average cost of my property a year from now? Also, I was thinking to request in writing that a deposit shall be made at the time of signing the lease agreement as well as an amount extra on top of the rent during the lease period. The agreed amount would be put towards the purchase of the property at the end of the lease term, unless the tenant refuses to purchase the unit.  Could the deposit amount 5% of the agreed sale price of the home ? Any feedback on the above subject would be appreciated.

Yuse Segura. 

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@Yuse Segura , I agree that "You have to know your market and know what you are willing to accept". I would also add: know what the Buyer is willing to accept!

It's typical for a Lease-with-Option to have a non-refundable deposit, which does end up as being (part of?) their actual deposit, if and when they exercise their Option to purchase. In my eyes, it would make sense for that "deposit" to be around the same amount as you might guess the home would appreciate over the following year. So, your agreed purchase price might be exactly full current market value (only). [But sure, you could ask for a premium future price]. They then either fully fund it in a year, or, they have to come up with new non-refundable deposits if they wish to renew their Option/s, or, they forfeit those past deposits anyway.

As for ongoing lease payments, they don't actually have to be any more than normal lease rates, right? If you're going to have some sort of refundable status for a higher-than-market regime, depending on their future decision, that might end up complicating the equation unnecessarily?

@ Roger Hobbes and @ Brent Coombs. Thank you guys so much for your feedback. I'm excited about my discussion about the lease agreement tonight. I will let you guys know how it went. 

@Daniel Massicotte Thank you for reaching out. My partner and I met with the woman and discussed the rent with option to buy agreement. Since then, we have been asked to postpone a second meeting as she has been dealing with the separation with her husband in the meantime. She stated she is very interested in renting and then owning the property. We have started to question her interest based on the fact that she keeps delaying our next meet up. Our property ad is still up online. Other than Kijiji, do you have any suggestions of websites were we can post the ad? 

I would create a RTO leadgen offer, host the page, and buy traffic from FaceBook.

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