How to determine rentback rate?

[dleung]

What is the name of your state? New York
I'm entering into a purchase of a single family home in Flushing, Queens. The purchase price is 985,000. The sellers contract is proposing a rentback amount if needed after the closing date iat a daily rate of 3,000/month. My lawyer says it's too low. What is a formula for determining a fair rate and an associated penalty rate, so that they wouldn't want to take advantage of us?
Thanks.

 

[HomeGuru]

What is the name of your state? New York
I'm entering into a purchase of a single family home in Flushing, Queens. The purchase price is 985,000. The sellers contract is proposing a rentback amount if needed after the closing date iat a daily rate of 3,000/month. My lawyer says it's too low. What is a formula for determining a fair rate and an associated penalty rate, so that they wouldn't want to take advantage of us?
Thanks.

**A: there is no standard formula. You can use prevailing rental rates, the amount of your mortgage payment or say $10K per month.

 

[pojo2]

Really bad idea to start with and also realize you are taking on a potential myriad of troubles! Unless of course you want to turn this into a rental property.

Set a number of days you are comfortable with say 15 then write in your RENTAL AGREEMENT (that is what you are taking on complete with the laws that regulate LLs) that past that time there will be a 1000 dollar per day penalty.

Remember when YOU start paying the mortgage they may not be so nice to the property, and also remember that lenders and insurance companies do not like the fact someone else is living in the home they are lending on or insuring.

 

[nextwife]

I've also seen (at least in MY area) an "escrow to guaranty occupancy" done, over and above the rental amount. This is a lump sum held from proceeds by the title company, that is forfeit if they fail to vacate by whatever the preagreed, contractual "drop-dead occupancy date" may be. That lights a fire under them to make sure they get out by that date. And it's usually a BIG chunk of change, such as $15,000. On a home of that price, I'd at least triple that.

 

[HomeGuru]

I've also seen (at least in MY area) an "escrow to guaranty occupancy" done, over and above the rental amount. This is a lump sum held from proceeds by the title company, that is forfeit if they fail to vacate by whatever the preagreed, contractual "drop-dead occupancy date" may be. That lights a fire under them to make sure they get out by that date. And it's usually a BIG chunk of change, such as $15,000. On a home of that price, I'd at least triple that.

**A: that's a novel idea.

 

[You Are Guilty]

If this is for a house north of Northern Blvd. (and at that price, I certainly hope it is), $3k is extremely low -- that's what a 2BR apt. rents for. As your agent for house rental prices in the area and you'll get a feel for what might be more appropriate.

 

[dleung]

All great replies so far. Didn't know some of these things!

 

[Gadfly]

We use a monthly rent equal to 1% of the selling price. In your case $9,850.00 per month.

 

[HomeGuru]

We use a monthly rent equal to 1% of the selling price. In your case $9,850.00 per month.

**A: hence one of my options.