RentToOwn-HouseFinder.com - Lease options...what should I offer?

Lease options...what should I offer?

I am writing a lease option on a property that is free and clear. Of course I want as much monthly positive cash flow as possible. Should I initially offer an monthly lease payment that is just enough to cover the expenses, which would just be taxes and insurance since there is no mortgage. What is reasonable. Is this where you would start? Tell me about the best lease option deals you've been able to put together. Don't leave out any details, please. I'm the investor...I want to lease option from the seller and then sublease option, assign, sell, rent, to a tenant/ buyer...I want to make a profit...I am the investor. What is reasonable to offer a motivated seller who owns a property free and clear on a monthly lease option as an investor?...I am going to find a tenant/buyer, manage the property for months, manage the tenant/buyer for months, help the tenant/buyer secure financing, close the transaction etc. I am the investor. The middle man...The agent. Not the renter.

Public Comments

You need to do a rental market analysis on the area where the property is located. Price it accordingly. Whether you have a mortgage or not should not enter into the final rental amount. Taxes and insurance only may be too low a rent. You then need to set up qualifying guidelines, credit history, rental history, employment history, smokers, non-smokers, pets, no pets, deposit amount, what you will be providing (appliances) repairs, yard maintenance, Property code requirements (smoke detectors etc...) who pays what utilities. Perhaps you should seriously consider letting a professional property manager take care of your home. They are experts, they do all the leg work and their fee is tax deductible.
The best thing to do is look at other places for rent that are similar and in the area. This will give you a good base-line to use. That is if you are double what every one else is charging. Then you are going to find it very hard to rent the property, unless you can justify the fact that it is double every place else. Or on the other end if you just charge "taxes and insurance" that may be too low. Now, you also should to account for your time to "manage" the property. As a landlord you will be responsible for maintenence and should put a little "cushion" in to cover those expenses. The alternative to this is give the renters a discount, but require that they pay for any repairs. Then you should also have an attorney write up the lease agreement for you. You want to make sure you have covered all of your bases. Also, sometimes you can go to office supply stores and pick up pre-printed leases that cover the basics.
Dingo, please hire a professional to assist you. Any amount that they would charge would be more than made up in nightmares and hassles to you. The web is covered with rental, landlord nightmare stories...search for them while you get your education...you are doing the right thing to ask lots of questions...just get professional help when it comes to contracts etc.
When I look at lease options this is normally how I would address it. Its not going to be exactly what you want to hear but these are my thoughts from experience. A lease is basically like a rental but they can buy the property. Because of this normally you will give the seller a bonus. Example. If they could rent the property for $1,000 a month. I would say you want to increase that by 20-25% for a lease option. So I would instruct either party this is what is expected. So the same home that rents for $1,000 a month I would say a least option of $1,200 is a good starting point. With maybe 300 of that going toward your equity if you buy it. That way you are actually paying $900 rent. The seller is getting a bonus if you dont buy it, but its putting a requirement on you to pay. Its a win win. But thats where I would start, 20-25% above what they could rent it for. *UPDATE* For example I have a property that somebody wanted to give me a lease option for. I owned it free and clear as well. I clearly just wanted my money out. If Im going to lease option it my risk is more, so I want more. I was renting it for 1200 a month. I lease optioned it for 1500 a month (nothing going toward principal with a 2 year ballon). I should have asked for more. They turned around and rented it to somebody else. I had to approve of the rent. They are doing exactly what you want to do. They are losing 200 a month right now in negative cash flow. They are hoping my property goes up in 2 years. If it doesnt they lost 5,000. If it goes way up, they make the difference. You are going to have to pay what they could rent it for plus to get anybody to do a lease option. They arent going to let you just give them 100 a month so you can rent it for 1000 a month. It doenst matter that its free and clear. Okay I take that back. If the person came to me and said I will give you 25,000 down and i want a least option for 18 months and I will give you 200 a month. I would have taken it. But there is no way they wont get fair market rent during the lease. Not on this world. Only way it could possibly work is this way. Lets say the house is worth 100K and you say I will offer you 120K (Guaranteed, no clue how you guarantee that in 2 years). During that time I want to be able to have a lease for 2 years. I will pay all taxes and insurance. You get you 120K in 2 years. They would have to be the 2 most stupid people on the entire earth. But its possible somebody is that stupid. Otherwise you have to give them RENT VALUE of the propery during the time of the lease. Period. Plus money toward the lease. It seems like you are trying to act as a property manager and getting around the licensing requirements. The only way to lease it, manage the propery, collect money is to have a license unless you are the home owner. It sound like you are acting as a property manager. This will require a license in every state. Unless you are the owner. ie you have the lease. I see where you are going with that. Here is your problem, the person giving you a lease, you only owe what the lease is for 100 bucks a month lets say. You rent it for 2,000 a month. Why would you sell it. You are making 1,900 a month. What seller is going to do that? Nobody. Now you cant tell the seller that if I get a lease for 2,000 a month I will give you 1,700 instead of the 100 and I will keep the 300. Now you are a property manager. Ie you need a license. If you want to do it as a flat out lease where you have control, you will have to give the seller RENT VALUE for the lease, plus more.