All Topics / Opinionated! / Lease to Buy

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  • Profile photo of L.A AussieL.A Aussie
    Join Date: 2006
    Post Count: 1,488

    Hi All,
    I have a rental property advertised for sale on the No Agent Property website at the moment. In fact, I don’t wish or need to sell it, but it is always advertised for sale if the price is what I am asking – you never know.
    I keep getting enquiries from potential buyers wanting to “Lease to Buy”, and when I ask them for further information they are reluctant to go into detail until meetings can be arranged etc. It all sounds a bit “Amway” to me so up until now I have declined to go any further.
    They offer to pay me enough rent to cover the mortgage (which is more rent than I am getting now, and they also offer me the full asking price! This all sounds too good to be true, and my belief is that if it looks to good to be true it probably is. Why would someone offer me more than market rent and the full asking price?
    When I asked one guy if it was a ‘wrap’ that he was trying to put in place he said “no; it is a lease to buy” but wouldn’t offer any more info until we met. Hmmm!
    Could someone please explain to me how the purchaser can do this deal without ripping both me and themselves off ?
    What are the pitfalls for me?

    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    Well, you will agree on a price now. So they may end up paying you a bit more rent per week now, but if they purchase the property down the track, prices will have risen, but their purchase price will have dropped (probably, depends on how it is structured). So they will be buying at a discount.

    You are basically giving up future potential capital gains for more rent now.

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    Profile photo of XeniaXenia
    Join Date: 2002
    Post Count: 1,231

    It is an innovative way to sell properties and to get your full asking price. It is also a win/win solution.

    My website could give you some input, we do it as a business in SA.

    There are no pitfalls if done properly, the only considerations from the sellers point of view is that:

    You put a cap on capital growth, so if there is apprecaiation in the property above the option strike price, it belongs to the tenant. I don’t consider this a downfall at all, it is part of a good business strategy, part of the win/win formula.

    Once you have a tenant/buyer commited to buying withing a time frame, say one or two years, it may be difficult to liquidate out of the property if you need to sell in a hurry. You are tied in for that length of time. But there are ways around this! [biggrin]

    Feel free to contact me with any specific questions. I only know SA legislation but you may be able to relate it back to similar rules in your state.

    Investment Property Management

    Profile photo of L.A AussieL.A Aussie
    Join Date: 2006
    Post Count: 1,488

    Thanks Guys for those answers. I have learned another new thing!

    Profile photo of shaunwalkershaunwalker
    Join Date: 2003
    Post Count: 403

    go to rick ottons home page
    he explains it alot clearer. there is even a free dvd!

    Lead, Follow or get out of the bloody way

Viewing 5 posts - 1 through 5 (of 5 total)

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