14 years ago my partners and I made a similar agreement with our landlord for the two commercial properties our business occupies. 4 years ago we exercised the option. We got two appraisals, took the average and set the price. Owner financed at a great rate. The converted rent pays the mortgage and taxes and we will own the properties free and clear in another 8 years.
The current overall default % is less than 1% and 0 for all credit ratings D and above.
Most of the loans are never funded because of the level of risk. You need to read each request and evaluate them individually. If you spread your risk over a large number of borrows, the risk/reward ratio looks reasonable to me. Just my opinion.
If the default rate grows, so will the interest rates to compensate.
I was thinking about doing an inspection before leasing to reduce the risk of walking away from the option money.
I have looked at zillow. The initial value is low 1.1, but if you adjust the age (House originally built in 42, torn down to foundation in 2002 and rebuilt) The value is close to the lising price. Before reading all the housing bubble news I was thinking of offering 1.25, now I would feel nervous offering 1.1
