Re lease options

I have done a few, but wouldn’t do them again the way I did. The tenants ended up making more money than me. Go for a rising strike price linked to the value of the property at the time of cashout, that way you can get some capital gain. Also look for short leases, about 2 years, so it doesn’t just drag on forever, unless you want it to.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email me

It’s already a win-win because the tenants get the chance to live in the property they’re buying, pay some of the deposit week-by-week in ‘rent’ and know the property will still be available when they are ready to buy. A good strike price should certainly be ‘in the money’, but you don’t have to forfeit all the CG unnecessarily. A ‘profit share’ is still a win-win.

scotty3

I am with jscott… The tenant (always refer to them as a buyer) must win. So too the seller and you in the middle.
I am currently finalising two sandwich (or back to back) lease options simutaneously which have taken far too long and cost far too much. I left my job nearly a year ago to jump in the deep end. I’ve come very close to throwing in the towel a number of times, however, I believe that I have gained some invaluable lessons that I thought would be helpful to you. Writing these lessons down will also help me to crystalise the learnings…

• Don’t buy in a bad area (eg housing trust/commission)
• never get so wrapped up in getting a deal that you forget there will be other buses just around the corner… walk away if it’s not working for you!
• always know how you want to exit from the deal and carefully analyse it from that point of view
• Simultaneously ADVERTISE widely including flyers, local newspaper ads, and multiple yard signs.
• Never give up
• Don’t use the strategy on a junky house.
• Make sure the house meets minimum requirements such as 3 bedrooms and a bathroom. Two bedroom houses are more difficult to sell.
• Don’t panic!
• Find buyers before going unconditional on the purchase or call contract.
• Don’t send/provide all of your application forms to the applicants until they have expressed interest in the house… I’m still trying to understand what’s best here??
• Never show the house to just one applicant. Stack appointments up about 5 mins apart to create a mild sense of urgency
• Be very careful in calculation your upfront (and ongoing fees) and costs in acquiring the property.
• Learn early that you should use resources of other people eg lawn mowing, flyer delivery / printing… Don’t get caught up with this stuff yourselves
• Make time to hang out at this forum regularly.
• Don’t underestimate the impact of buyer calls on your family life.

These lessons have been very expensive ones for me, but having learned them my sense is I am well placed to move forward in my investing career.

Let me know how you go.[cap]
Algenon