As this is my first post, I am not sure how this should go, but I am just wondering people’s opinions on the following:
I am considering an investment in a house and land package tailored to suit a tenant buyer. Tenant pays interest and all out goings like rates and intrest and around $80.00 per week ends up going towards their deposit over a 7 year period. If they dont excercise the option to purchase then they lose the money they have put in. If they improve the property they receive the benefit of the capital gain should they proceed with the purchase. Package is around $230k in a largeish country town who’s prices are booming, so purchase price worries me.
What do more seasoned investors think…Found this on the propertyinvesting.com home page.
Lease-Options
A lease option has the following two components:Thank you!
In preparing these notes I want to acknowledge the valuable help of Tony Barton and Max Gacitua.A residential lease over a property. The rental charged under the lease is usually slightly above market rates due to the unusual nature of the transaction and unlike a normal residential lease, the tenant pays all repairs and outgoings; and
A call option that allows (but does not compel) the tenant to purchase the property at a future date for an agreed future price. An initial fee is charged for this option which is then deducted from the purchase price if the option is taken up.
If the call option is exercised then a portion of each rental payment is applied against the purchase price.If the option lapses then the initial fee is forfeited and all the payments received under the deal are treated as rent.
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