I've seen many property for sale and labelled as investment only and usually is on 5 yearly basis, with an option to extend the lease to another 5 years.
These properties usually are much cheaper than similar properties but vacant.
i'm just wondering if we could actually live there after the 5 year investment period finished? If we could, I wonder why not many people purchase them, invest then move there after the lease period ends.
Hi
These are probably "lease to own" type deals. You are essentially purchasing an option on the property with some of the rent money coming off the purchase price.
eg. The property may be worth $200,000 now. They sell you an option for $2000 with a promise that you can purchase the house for $250,000 in 5 years time. You pay $300 pw rent, but market rent is $200. The $100 extra per week comes off the purchase price = $5000 per year = $25,000 after 5 years. So you may be able to buy the place for $225,000.
The person buying the property may be thinking the property prices are going to jump and it may be worth $300,000 in 5 years. they could still get the place for the agreed sum.
The person selling the property may be thinking property prices are going to stay flat for 5 years, it may be only worth $220,000 at the end of the lease and they will not buy it. The seller would get the extra rental income paid plus the $2000 option fee.
Usually these deals are more for owner occupied renters. it is up to you to negotiate with the seller on if you want to sub lease it out or live there yourself. you can also vary the terms, rent, option fee, renewal period etc.
I think these can be a good deal for the renters.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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