DIY L/O

Hi all,

I have a couple of questions regarding how to turn a -ve C/F IP to a +ve C/F IP by using a L/O.

These are my current IP stats:

Value: $185K
Rent: $165/week
Loan: P&I
weekly repay: $293

If I was to use a lease option, I would do it like this (with my very slight knowledge of the process):

Option price: $222K (+20% of current IP value)
Option call fee: $3700 (2% of IP value)
Option term: 6 years
weekly repay: $300/week

1) Would this be a fair deal both for me & the lease option client?

On these stats, we would only be $8/week C/F +ve, but it would turn the IP from -ve to +ve cashflow none the less, but only if someone wishes to enter into the L/O on these terms.

2) Given the original rent amount, can anyone advise me how to fairly calculate what weekly amount to charge for the lease option? I have read things like setting the rate 3% higher than current rate, but in this case that would make the weekly repay for the client about $377/week!!!! which to me looks a bit steep?

3) Also, after the 6 year term, would the client need to pay another lease option fee in order to secure another term, or does this just mean that the option price of the IP is re-adjusted with respect to the IP value at that time, and they can renew the term if they wish?

4) If they do not wish to renew the term for another option, do they forfeit the original option fee?

Thanks for all the advice. Although i wish to turn this IP into +ve C/F, i also wish to create a win-win situation, as this will help someone out who would normally not be able to get a house.

Thank you kindly [biggrin]

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