can anyone provide some real life examples of how they have structured lease options in the past (or currently).
including
purchase price
strike price
term of option
rent/week
rent creditsand what was the final outcome. ie was the option exercised? did the tenants move on? etc
thanks in advance
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
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phone 0412 437 582Hey there,
The rule in general is, the longer the option is in place … the higher the chance the option will be excersized.For example only 25% of tennants will excersize the option in the first year.
This increases as the years go by and almost 90% excersize in the final year.
Hope this helps. This is based on past experience and research averages. This is mainly due to commitment factor from the tennants part…. It is a bit like a relationship :o) the longer you stay togehter the higher the chances you will marry ….. just get to a time where you just take the plunge!This is my opinion only and I suggest you could conduct your own research to support you.
Thanks
KiwiLive example:
Location: Mount Druitt
Option Fee: $5K
Strike Price: $295,000
Weekly Rent: $250
Weekly Option: $145Combined weekly: $395
Term 36months
Did not excersize option at 18 months. did it again at a higher price!
Cheers
KiwiOriginally posted by Kiwi-Fulla:Live example:
Location: Mount Druitt
Option Fee: $5K
Strike Price: $295,000
Weekly Rent: $250
Weekly Option: $145Combined weekly: $395
Term 36months
Did not excersize option at 18 months. did it again at a higher price!
Cheers
KiwiI am exploring the possibility of purchasing thru Lease Option and would like to know:
1) Which amounts above can be counted towards the final purchase price when the option is exercised (deposit, rent, …)
2) Does the option fee count towards the final purchase price as above?
3) Is the “strike price” the agreed final price to purchase the property or is it the price that the property is initially purchased at?
Thanks
Hi Vernon
can’t speak for kiwi (thanks Kiwi by the way for providing those examples). But I’m presuming that the option fee of %5000 and the weekly option payment of $145 is dedicted from the final purchase price of $295,000.So the tenant has %5000 + 156x$145 =$27,620 to credit towards the purchase price if they exercised their option at the end of 3 years.
Hope this helps
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582Originally posted by Dr.X:Hi Vernon
can’t speak for kiwi (thanks Kiwi by the way for providing those examples). But I’m presuming that the option fee of %5000 and the weekly option payment of $145 is dedicted from the final purchase price of $295,000.So the tenant has %5000 + 156x$145 =$27,620 to credit towards the purchase price if they exercised their option at the end of 3 years.
Hope this helps
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582hi Dr X,
Thanks for the reply.
So can I assume that if the option is not exercised (and depending on the contract), the tenant would not get back any of this $27,620?
hey all,
This is the beauty of this tool…. you decide.I have “allowed” the upfront option fee to apply and to not apply… depends on the character of the tennant…. or how many applicants you get.
If times are tough and you ahve little to work with then yes…. if you hae applications falling out of your A@#e then you can decide and use it as leverage to get more of what you want… normal supply demand theory. Sort of like when K-Mart offers a great deal on “Roboraptors” (2005 toy of the year) and they market tne heck out of it… and only get 2 in per store… this provides a shortage and the frustrated buyers go and buy other things instead of just walking out…. yeah you get a percentage of people that will tell you to get stuffed…. but if you have 20 others saying thats fine…. then no problems.Whoops sorry back to hte point…
– Option fee is flexible
– Amount of rent credit is flexible
– even adding ealy paymnet terms to give an incentive ifpayment is paid in early …. also you can remove incentives as a penalty for late payments….It is really up to you…. put it together on the spot and then work outhte logistics of it all with your solicitor.
Flexibility is the key to win-win situations with the Good ole Lease Option instrument.
Cheers
KiwiOriginally posted by vernon:Originally posted by Dr.X:Hi Vernon
can’t speak for kiwi (thanks Kiwi by the way for providing those examples). But I’m presuming that the option fee of %5000 and the weekly option payment of $145 is dedicted from the final purchase price of $295,000.So the tenant has %5000 + 156x$145 =$27,620 to credit towards the purchase price if they exercised their option at the end of 3 years.
Hope this helps
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582hi Dr X,
Thanks for the reply.
So can I assume that if the option is not exercised (and depending on the contract), the tenant would not get back any of this $27,620?
Hi Vernon,
You are correct this is because you have an asset tied up that you ….. and you alone have first opportunity to purchase.
So if you:
– break the contract by not making hte paments…. you lose.
– Make late payments – you can forfeit that months rent credit.
– don’t excercise the option to buy the house…. you get nothing back.However on the + side you have: (provided you abide by the contract terms)
– house price fixed for period of the agreement
– No increase in rent above normal CPI index
– Landlord cannot sell house to another party
– Landlord cannot put a sign out the front for sale.
– Build a track record for lenders to show you can make payments on time and for a sufficient period of time to convince them you are not a risk
– Build deposit as equity faster than ANY OTHER METHOD.I have offered an incentive from time to time that if the tennant pulls out they get a portion of thier rent credit back like 20% in year one, 40% in year 2, 60% in year 3, 80% in year 4 and 100% in year five….
However the strike price is around 60% higher and it is intended that the tennant is not to excercize in less than 4 years to allow for market growth……
Cheers
KiwiHi Kiwi
thanks for all your helpful information. Sounds like you know alot about these, I’m just wondering, do you allow tenants to take out a caveat on the properties that they are lease optioning?
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582
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