sorry for the delay...haven't been on line much lately!
We live in the Southern Tier of NY State (roughly Binghamton to Hornell, also includes Bath, Corning, Horseheads, Elmira, Owego). The median house price in our county is roughly $76,000 (yes, you read that correctly). There is relatively little national bank lending activity. In the last real estate boom prices didn't go up much here, and they didn't go down much in the crash - market is stable to a fault.
Here is an example of a recent deal:
3 bedroom, 1.5 baths, 1,416sf, built 1920's
tax assessor's opinion of market value (think of as an ARV figure), $62,796
nice school district, okay neighborhood, less great block
Short sale. Bank had approved a deal, but buyer's lawyer was unwilling to close due to a small title issue (which our lawyer was able to cure to our satisfaction). Listing broker called us about 13 months after we'd initially looked at the property and asked if we could close before the approval expired (about 4 weeks at that point). That's the only time this has happened, but most properties we purchase are between $10,000 and $25,000 acquisition price.
our purchase price $18,500; total due at closing (atty fee, transfer taxes, etc) $19,546.13
rent-to-own client gave us $4,000 option fee (this is a bit unusual, sometimes we get one month down or a nominal amount, but the wife's Dad wanted to help)
lease 20 years $900/month, this includes the up to $8,000 available for repair money (so far they have used about $6,000). If they use less than $8,000 in repair money, that in effect shortens the term of the lease slightly. We pay property insurance (structure only, clients need renter's insurance for personal property) and real estate taxes (roughly $2,200 per year currently). The monthly payment increases when taxes or insurance go up.
Signed lease same day as we purchased the property, mid-July. First payment due Sept 1st (we often give a payment holiday until the target move-in date). Already have received said 1st payment.
If they use all $8,000 in fix-up funds and pay on time each month, at the end of the lease we give them the deed and they own the house free and clear. This is spelled out in the option agreement.
Option buy-out schedule is most similar to a mortgage for $83,000 at 6.63% interest or so: year one, $83,000; year 2, $82,000; year 3, $81,000 and etc. down to year 17, $36,000; year 18, $28,000; year 19, $12,000; year 20 (before final month), $5,000. Our implied interest rates vary based on risk (both credit of client and condition/location of property) and amount of capital gain; this interest rate is toward the low end of what we have done; some range as high as 11%.
We allow lump-sum pre-payments and redo the "amortization" for such pre-payments but do not change the monthly payment (so shortens the life of the lease). Option expires if client is more than 30 days late with rent at any time.
Clients are a 20-something married couple with one child. Husband has a steady job at a local manufacturer. Wife works part time as a nurse's aid. Wife's father is a contractor and will do anything to help his grandson. They have repaired the roof, re-done all interior surfaces (new floors, new paint, some new drywall, all new ceilings), new water heater, etc. and spruced up the exterior landscaping.