IP disposal:Rent-to-own

[JTKT13]

We have an IP in the Ipswich area that has to be sold by Dec 2007. I have been monitoring alternative strategies such as rent-to-own (r2o) for some time and thought that this would be a good opportunity to try the technique out.

The property is a 6 years old 3 b/r brick veneer DLUG house on 500m2 block renting for $220 pw. We have a tenant whose lease expires on June of this year. The property has been recently valued in the range of $225,000 to $235,000.

Our plan is as follows:
1. Purchase the "rent 2 own" pack from Rick Otton
1. Brief our managing agent for the property on the r2o methodology
2. Give tenant 2 months notice in April
3. Place the property on the market (with our agent) in April as a r2o. Proposed r2o details would be:
i. Lease period 18 months (option can be exercised at this time)
ii. Option price $235,000
iii. Lease price to be set in the range of $300 to $350 per week
4. If there are no sales in sight when tenant vacates in June then the property would put back on the rental market.

The following assumptions are implicit in this strategy

a. r2o will yield a higher price than a direct sale in this market
b. r2o will produce a quicker sale in this market
c. The market in Ipswich is unlikely to move up in the next 18 months

I would be very interested in comments (critical or otherwise) on the proposed approach and our assumptions

Thanks
James

 

[pmcintosh]

What about approaching the tenant with a view to them buying if they like the place. Saves on agent fees and you may have a committed buyer. Just a thought.

 

[Qlds007]

I wouldnt suggest a LTO in Qld we use a License to Occupy and find this a lot easier

 

[JTKT13]

I wouldnt suggest a LTO in Qld we use a License to Occupy and find this a lot easier

Richard

Could you expand on how the LTO works

Regards
James

 

[JTKT13]

What about approaching the tenant with a view to them buying if they like the place. Saves on agent fees and you may have a committed buyer. Just a thought.

That is a possibility however I would like to use the opportunity to try an alternative selling strategy. From my knowledeg of the tenant if they were interested it would only be with a direct sale

 

[Cubed]

Hi,

renters I have found have a hard time making the head space switch to become buyers.

With a r2o you should not need managing agents if you set it up right. I would invest in your education and get dirty in the deal to continue, you will make a few mistakes, get them out of the way so you can do the next one .

Cheers