Rent with purchase option to tenant
Rent with purchase option to tenant
OWN Rent with a tenant purchase option
We all know the well-known method of buying property and renting it in what is called a yielding property.
But there is a better way to do this.
This way you will significantly increase your return and also lower the risk level of the transaction.
The method is called rent with a purchase option for the tenant.
You buy a rental property by using your money or other money (a subject for a separate post), renovating it to a suitable level for rent and even a little below that and offering the property to a large public in the United States that currently rents a property but would be happy to buy a home if only he could get a mortgage from the bank.
Many Americans cannot buy a home even though they are interested in it because there is a method in the United States that scores their credit rating. If their credit rating is low (usually below 600) they will not get a mortgage from the banks.
So they have to live in a rented apartment until you enter the picture and offer them to rent from you with a purchase option.
In exchange for the option you grant, the lessee pays an option fee (OPTION CNOSIDRATION).
The option fees will not be returned to the tenant if he chooses not to exercise the option.
In addition you can charge a slightly higher rent in the usual market rents because you are giving an option.
In this technique you create two sure profit sources and one optional one as opposed to one profit source in a regular rental.
First profit source: Option fees
The second source of profit: rents
Third (uncertain) profit source: Proceeds from the sale of the property (the tenant decided to exercise the option)
In addition, all ongoing maintenance will apply to the tenant which will make him maintain the house well and will significantly reduce your current expenses as the owner of the property.
Numerical Example:
House worth $ 80,000
The house was purchased by you at 60,000 $ (costs including a slight renovation)
You are offering the property for rent at $ 1,100 (average rent in the $ 1,000 range) but consider a total of $ 100 of the rent at the expense of a future purchase (if made).
You request $ 3,000 from the renter for the option to purchase the conference within a time period of 24 months for $ 88,000 (embodies a current market value plus an increase in value of 5 per cent per year).
At the end of the option period if the tenant has not exercised it, 2 has the following options:
1. The tenant leaves the property at the end of the rental period and resumes the conference to rent with a purchase option.
2. You offer your tenant to provide owner financing to purchase the property and sign a LAND CONTRACT
Where we will check your return during the option period (24 months):
Revenue:
One-time option fee: $ 3,000
Monthly fee: $ 1,100
Expenses:
City taxes: $ 250
Property insurance: 50 $
Monthly positive flow: 800 $
Annual positive cash flow: $ 9,600
Calculation of yield in two years:
(9,600 * 2) + 3,000 = 22,200
22,200 / 60,000 =% 37
Calculation of yield on an annual basis: 17.5%
In conclusion, such transactions do require a little more effort than regular transactions, but the effort is most worthwhile!
Adds you a link to my short lesson on:
https://www.youtube.com/watch?v=wTqOJA7jUoM
I would be happy to answer questions. Good luck to everyone !
How to invest wisely in the United States. This lesson teaches what a lease is with a purchase option for a tenant and how you can earn more and lower risk. The lesson is taught by Shai Halevi, a real estate entrepreneur…
Link to the original post on the United States Real Estate Forum on Facebook - Works on a desktop computer:
https://www.facebook.com/1885945295012997/posts/2204336196507237
The original responses to the post can be read at the bottom of the current post page on the site or in the link to a post on Facebook and of course you are invited to join the discussion
Indeed a real estate virtuoso, a pool of inspiring knowledge and experience. Just fun to read your posts!
Achla Video Shay,
A small question, who finds you this special tenant? The management company or the agent? And when the sale are paid 6% central fee? Because it did not appear in the calculation
Thanks so much Shi ,?
One of the biggest… Thanks Shay
Isn't Rising Star is Shining Star :)?
Don't you have the gift of numbers and creativity ???
Thanks for the post
Thank you very much Shay Halevi
What fun to see entrepreneurs thinking outside the box! Well done ???
Shay, thank you so much for the detailed post and informative video. Undoubtedly, this is an outstanding method for maximizing profits in real estate. Cheers! ?
A direct continuation of an existing post on the subject of real estate Nafdia that I wrote recently
Thank you Shai, Achla Post
His nose is huge. Thank you very much
Shay, you're just a real estate virtuoso in the US! As usual, brings interesting and creative deals. Great post!
As usual a real master. You learn all over again from you! Stunning. Watch the video and wait for the extra lessons 😉
Shay you are a cannon in your field !!!!! People still do not know how much value you can give. Champion.
Thanks Shay. And as you can see, Xi won the Rising Star rank because of his empowering posts that caused many comments! Well done ???????