Hello everyone.
I was just wondering what would be the upfront costs for someone entering into a lease option (Buyer’s point of view)? I realise they have to put up an upfront option fee but do they pay stamp duty on this?
Cheers
Hi Jumbo123
I am relatively new to L/O and am doing my first at the moment. What I have found is you decide the amount of money you want as an upfront option payment. This can be whatever you think the buyer can comfortably afford. It also depends on the cost of the property you have and its condition. I have talked to people who have charged $5000 to $8000 or as little as $1000: so it is up to you. The thing you don’t want to do is max out your buyer, you should aim for a win win situation this way you will have more of a chance that your buyer will stay the distance.
I think your buyer does not have to pay stamp duty because you do not have to register the option fee it is an up front payment to secure a commitment to buy the property at a later date. This fee can be taken off the cost of the property when the buyer activates the option or you can simply keep it or credit only half, it is up to you. The buyer will have to pay stamp duty if they buy you out at a later date as this then becomes a normal property purchase.
[cap]If the buyer chooses to opt out of the option then they lose the option fee.
Hope this helpsYes I beleive they wouldn’t have to pay stamp duty on the option, but it may vary from state to state. beside the option fee, the only other cost would be probably legal fees to have a solititor check out the agreements and maybe lodge a caveat.
Terryw
Discover Home Loans
North Sydney
[email protected]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
Thanks for that. I thought that would be the case with regards to stamp duty.
Hi Jumbo123
I am 100% sure that your buyer does not pay stamp duty up front.Stamp duty is only triggered by an exchange of contracts and as you are not actually exchanging at first the buyer is only leasing the property as any tennant does. If the buyer takes up your option at a later date then they pay stamp duty when they exchange contracts.
The option fee you charge the buyer becomes income for you and is taxable the same as rent money.
Hope this helps. [cool3]Thanks Kerwyn, i appreciate it.
Thanks Kerwyn, i appreciate it.
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