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  1. #21
    Join Date
    May 2007
    Location
    Chch
    Posts
    773

    Default

    Is anybody going to put infinity out of his misery? He thinks Phil's post is directed at him

  2. #22
    Join Date
    Feb 2004
    Location
    Newcastle-under-Lyme
    Posts
    3,066

    Default

    1. This is a pretty obvious way to abuse the lease option system, no surprise that someone whose interest is maximising the short term profit is doing it, I suspect there are quite a few who do, even if they talk the language of "win/win" (While I do acknowledge there are others who don't)

    2. I'm also not surprised by the associations nor by the reaction of PJ at people asking questions...

    Cheers
    David Hunter

  3. #23
    Join Date
    Nov 2007
    Posts
    166

    Default

    Can someone give a 3 line version of the Lease Option process? I am struggling to understand why someone would choose to pay $650 pw to rent a $365pw house?

  4. #24
    Join Date
    Oct 2006
    Posts
    368

    Default

    BrettC part of the $650 is used as whats called a "option consideration". Basically it is saved every week and taken off the price of the house at the end of the agreement. This way the tenant buyer builds up equity in the home. By the end of the period they can go to the bank and get finance.

    Hope this helps

  5. #25
    Join Date
    Nov 2007
    Posts
    166

    Default

    Cheers Reuben.

    So... If the extra payment is consideration, and is subtracted from the purchase price.... then the only money being made is the interest on the consideration and, I assume, a fee for granting the option?

    Sounds a bloody complicated way of making not much.

  6. #26
    Join Date
    Oct 2006
    Posts
    368

    Default

    The key is to buy right - make improvements or whatever so your profit is made there and then. Get a valuation and most people sign the tenant buyer at that price so any capital gain is the TBers.

    The main advantage in Lease Options (for the investor) is positive cashflow. The advantage for the TBer is to be able to buy at todays prices, tomorrow.

    Of course there is alot of debate on this forum whether this the lease option strategy is fair to the TBer.
    Last edited by rueben; 10-03-2008 at 11:15 PM.

  7. #27
    Join Date
    Apr 2006
    Posts
    4,018

    Default

    I see that Dean has waited until PJ is tucked up in bed to post the following comment on the RM site:

    Doesn't make the hydrauliking of the price any less unethical Phil. People will go to jail if they do it.
    I thought I'd reproduce it here, as it won't last long over here.

  8. #28
    Join Date
    Jun 2005
    Location
    auckland New Zealand
    Posts
    5,236

    Default

    Actually Paul I simply replaed a comment that mysteriously vanished earlier, 3 times so far :-).

    As this could stuff up LO's I am simply trying to point out the issue for them.

  9. #29
    Join Date
    Apr 2006
    Posts
    4,018

    Default

    Why do you think that this is a jailworthy offense Dean?

    It is most certainly immoral, but is it currently (i) illegal under NZ law, and if so (ii) punishible by imprisonment?

    Paul

  10. #30
    Join Date
    Apr 2006
    Posts
    4,018

    Default

    Why do you think that the lease is set up as a ten year lease, with the price "hydraulicked" (is that a word?) by $65K? (20% above market value)

    It is to ensure that the TB can't exercise their option to purchase until the value of the property has reached the option price. In a market like this, that could take several years. All the while the "investor" is raking in the cashflow.

    At some stage the TB might realise that they are being taken for a ride, but the "investor" has them over a barrel with non-refundable fees and/or credits. (Who knows how the deal in the email is structured. Someone bent enough to set the option price at 20% above FMV would have no qualms taking a $10K non-refundable option fee, and make all of the credits non-refundable.)

    It is no surprise that PJ is defending this practice - he advocates taking advantage of dummies in order to purchase property cheaply.

    But wait - the TB is going to tell the world how they think they are in a win-win situation. Two words: Stockholm Syndrome.

    (The comparison to hostage taking is apt.)

    Paul


 

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