lease option with current market

[abalone]

Hi,

Can anyone tell me with the current market?? Is Lease Option possible??

Say I purchased a house for $300k . My monthly repayment P&I will be $2,120 for 7% fixed rate. Weekly repayment is $530

To do lease option, I have to charge buyer >$530 p/w
With rental for property around $300k, people are expected to pay less than $200 p/w. Or is there people actually willing to pay such a high premium price to own a property.

Am I missing a bigger picture??? Without the option fee and outgoing fee, the price already look to high for any buyer to be interested. Any insights with this stategy will be very much appreciated.

Abalone

 

[Bmok]

Hi Abalone,

From my experience so far, those people who are interested in a "Lease Option" are only interested in this because they don't have enough deposit to qualify with the bank, and these people are around no matter what the current market situation is like.

Plus most of those that I've dealt with are prepared to purchase a cheaper house and build up their equity from there - so a $300K house would be out of the question for my "Rent Option" tenants.

Their rent would appear to be higher than traditional rent but is calculated based on
(1) the interest for the loan [fixed for the term of the Lease] to purchase their house + costs = loan taken out I/O fixed for 5 years
(2) rates, insurance and maintenance
and (3) your profit margin.
This annual cost is divided by 52 to give you the weekly "rent".

If you allow part of the rent as going towards the deposit part of the Option, then the reduced rent would be closer to traditional rents.

All this is explained in more detail by Danny & Paul.

Cheers,
Bernard