If purchasing a property on lease option and you were to assume the owners repayments and costs which were principal and interest, would it be far to have an agreed amount come off the purchase price as your repayments are going towards the principal as well. The agreed end purchase price is slightly above market with probably a 5k fee also put down.
Depends on the situation.
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
You need to consider
– strike price
– term
– how much comes off
– etc
eg a property valued at $500,000 now
You take a one year option to buy it for $505,000 with you paying the equivalent of the loan repayments
or
You take a 1 year option to buy it at market value in 12 months time as determined by the average of 2 independant valuations.
or
You take a 5 year option and have the ability to buy the property for $500,000 with nothing coming off
etc
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
Looks from your question you are considering Terry’s option 1. Are you getting any other benefit in the meantime eg living in the house & not paying rent or just looking to purchase in x years?
Who’s responsible for costs ie maintenance, rates, insurance etc during the option period & in what proportion?
Hi gags
The following article about Lease/Options may help:
https://www.propertyinvesting.com/strategies/lease-options
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Thanks everyone for the comments. Yes terry I am looking at your number 1 option except hoping to get it a bit longer than a year.scott I am getting access to the property and I will be responsible for all outgoings, although the loan repayments are a lot higher than what you would pay as rent for the property. This is because the loan that is associated with the place had a fixed interest rate for some time that basically drove the loan up. This is where my thinking that I am paying above what rent would be as we'll as slightly higher market value that there should perhaps be some coming off the principal.
thanks Paul for the link. Checking it out now.
A lot of Lease/Options, i.e. Rent To Own's, have what are called Price Credits built into the agreement, i.e. a portion of the rent is credited towards the deposit on the property, IF the Option is exercised and the sale completed. I've also heard them called Equity Credits and Rent Credits. Same thing though.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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