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I agree. I did the GBI course in Dec and I got a lot more out of it than just the contracts. In fact, one of the bigger issues is ensuring you are acting with integrity at all times. Its easy to set purchasers up to fail and give the whole system a bad reputation. The tax/GST issue could also catch the novice.
Does anyone have any figures on how many people actually take up the option? Also is this effected by the cycle at all?
I know a guy who set up leases and they all went through in the last cycle because properties went up so high. I think a similar thing happened to Dolf De Roos in US where they were not expecting to lose all their property but were beaten by the market.
Dean you are properly the closest to this market? In your experience how many people go through to taking the option to buy as a % and how does this change pending market conditions.
Hi Paul. My situation personally is quite different to most as I only do lease options to help people into their own homes. Because I permanently fix the sale price no tenant buyer of mine would ever not exercise their option because they would be kissing away a fortune.
Having said that I have only been doing them actively for 18 months so I don't have a long history myself yet.
However the stats from GBI and overseas would indicate that as many as 80% would not exercise their options in a more typical scenario of selling at RV when option is exercised. And in a market like New Zealand I can only sleep at night by fixing the price permanently, to avoid that happening. In cheaper markets where houses are 100 to 150K it doesn't matter so much at all, but all my properties are 400K and up so I want to make 100% certain my TB's can get into their own homes.
I find it really cool actually. My first lease option 18 months ago means that if the TB optioned me today he would walk away with 150k in his hand if he sold. That's more money than he could save in his entire life. And I get great cashflow in the meantime!!
I love lease options.
Cheers Dean. That is neat.You certainly have gone up in my estimations. Knowing that it is fixed would be a win-win. That is hugly different from the rent-to-own stories I heard where they were designed to fail by rising to always be above market so that they could not be actioned. Now I see how that could be a legimiate business without the ethical concern.
Yes my original teachers at GBI think I am nuts but it works for me. Great cashflow during the process and total win for the tenant buyer. I teach this methodology at my courses as well. Not that there is anything wrong with the "normal" scenario, I just think genuine win~win is better.
I've said it before, but lets say it as an official ethicist this time, I think the way you structure your lease options is the most ethical manner possible
Cheers
David
I think the major advantage of L/O's vs wraps (not that many do wraps these days) is that you CAN raise the purchase price . I set mine up to encourage my buyers to refinance after 2 yrs - by then they have 5% deposit & a good savings record . They have every chance of getting a loan .
If for some reason they don't get finance at that point the contract rolls over & the price goes up .
What is unethical about that ? In fact if you don't put the price up you should consider yourself a caritable organisation & apply for government funding
It's all different strokes for different folks.
Ultimately it comes down to your personal position and intention.
I believe in giving everyone a fair deal - though like John Burley says - "it's my toy and I'll play when and with who I want" ie. I'll decide how it goes not the Tenant buyer.
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