Lease Options - High End - in this Market

[jane]

Hi
I haven't formally been to a course on LO's but do they work at the top end of the market?
We are thinking of doing it on our home and we worked out that the tenant buyer would have to pay around $778 pw if we were to lock in some equity in 4 yrs time.
That's seems very high and am skeptical that there would be punters out there particulary in these economic times.
What's the ticket? Good marketing?
Cheers
Jane

[Kerry Christian]

Jane

What is High end

I haven't formally been to a course on LO's but do they work at the top end of the market? 
We are thinking of doing it on our home and we worked out that the tenant buyer would have to pay around $778 pw if we were to lock in some equity in 4 yrs time.

sounds high

[Dean@Massiveaction]

Hi Jane, the short answer is yes. I have TBer's paying up to $850 a week.

[Rolf]

I had one going at $800/wk, and they liked it enough to buy me out after just 3 months. A pity since it was great cashflow, but good on them.

[Keithw]

Would you mind sharing the numbers on that one Rolf ?
particularly the sell price

[Cliffy]

Yes, they can work but the market is a lot thinner. You need to factor in the down side - what happens if they lose a job and bail? How long would it take to find someone else?
Much safer at lower levels, especially starting out.

[Rolf]

Would you mind sharing the numbers on that one Rolf ?
particularly the sell price

Purchase price: $357k
Weekly expenses: ~$600
Weekly LO payment: $800
Weekly credit: $100 (as I remember)
Sell price: $375k

This was a 4brm 1950's house in West Auckland

[Keithw]

Thanks for that Rolf.
As I figured, your 800 a week was for a 375k place.
Much above this (maybe to 450k or so)& I don't think it works too well.
I looked at it for one of my 650k places & with just the holding costs being 1200 pw before any margins or anything, it makes the weekly LO payment way too high for most.

I can see why your tenants would be happy to be paying the 800pw as it's not much more than they would have to pay on a mortgage.

[Dean@Massiveaction]

LO's should be at or below mortgage payments given that the TBers will usually be credit impaired.

[ream]

Hi
I haven't formally been to a course on LO's but do they work at the top end of the market?
We are thinking of doing it on our home and we worked out that the tenant buyer would have to pay around $778 pw if we were to lock in some equity in 4 yrs time.
That's seems very high and am skeptical that there would be punters out there particulary in these economic times.
What's the ticket? Good marketing?
Cheers
Jane

Think you'll struggle in Christchurch Jane, we've got them up to $600 but under $500 is a lot easier. Eli

[Clark Kent]

When you are asking a potential TB what there household net income is on a weekely basis. Say for example its $1400 net, what is the best way to work out how much they could afford to pay a week for a LO?

[Dean@Massiveaction]

Ask them :-).
You don't care what their income is, just "what can they afford to pay per week for the opportunity to own their own home"

[Clark Kent]

Thanks Dean, I will also try and acertain what if any HP payments they make and take this along with other expenses into consideration, as i think sometimes people think they can afford more than actually can.

Im just about to settle on my first rental property in a couple of weeks but would like to start adding a few LO properties to the portfolio

The $240k - $320k homes in Christchurch would be an ideal market.

[Clark Kent]

Dean, What price bracket do you find you do most of your L.O deals in?

[whitt]

Also the banks use about a third of income for loan servicing . This can be a ball park figure to start with. Allowing you to adjust up or down depending on each case.

eg $1400pw = approx $460. No point trying to put them into a $650 pw lease option if they will fall over or the loan at end of term will be too high.

try work out what loan will be when they get one at end of LO term. Thi scan help give you another figure to try work with too.