Lease Options

I have Tony Barton’s formula, but don’t like it as it gives too much to the tenant. Why don’t you use a % off the valuation at the time they want to cash you out, or a % of any capital gain? You will benefit more.

Terryw
Discover Home Loans
North Sydney
[email protected]

You could just use something like a price of $240,000 (ie 20% markup) reducing to $1 over 25 years. Part of each weeks rent could go to reducing the strike price.

The way I see it, you have three choices with lease options

1) a Strike price higher than your purchase price that reduces over time.
eg $240,000 reducing to $1 over 25 years

2) a static price that for the period of the option.
eg $240,000. that remains the same until they exercise the option

3) a strike price that actually increases in line with the market.
eg. 20% discount on market value when they want to cash you out wiht a minimum strike price of $240,000. OR give them 50% of any capital appreciation off their purchase price. eg Original price was $200,00, in 5 years time they want to excercise their option and it is worth $280,000. they get a $40,000 discount and get if for $240,000.

Number 1 is just like an installment contract and benefits the tenant most. Number 3 is the best for you, the option seller, but the tenant also benefits as well.

Terryw
Discover Home Loans
North Sydney
[email protected]

Hi,

Tony’s formula works for him, Terry’s formula works for him, my formula works for me.

The question is… what’s your formula and how will it work for you?

As I understand it, Tony made his up from scratch… you can too.

Great to seek some advice though and thanks to Terry for providing guidance.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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