lease option

Lease Option Advantages to the Tenant/Buyer

Imagine that you have just moved to a new town.  You may have good credit or not.  Yet you have some savings.  You don’t really want to be a renter yet you cannot qualify for a loan just yet because you are new to the area.  What are you suppose to do?

That is the beauty of a lease option (also known as a rent to own).  You are putting down a minimal payment on a home that you do intend to buy when you can qualify.  It requires what is called an option payment (not to be confused with a down payment even though they are very similar).  This option payment ranges from as low as 2% of the purchase price of the home to as much as 9 or 10%.  This payment, however, is applied toward that eventual purchase of the home.  It can be considered a seller’s concession up to a certain amount where the seller is paying your closing costs and some of your down payment.  Any remaining monies will come directly off of the purchase price.  This may mean writing an addendum to lower the original price as per your bank lending requirements.

The other beauty is that you don’t have to move when you are able to buy.  You can buy at any time that you are ready.  Typically I see two year options with the right of extensions.  Let’s say you can qualify in 18 months and you are doing a 2 year option.  Thus, around the 18th month you begin the buying process.  If there are delays on your closing, no problem.  No worries of telling a landlord you need two additional weeks because of things.  No worries with the seller as they would actually make a little more money on the extra rent.  And no worries for yourself stressing out over the whole situation.  You are already living in the home you are buying.

Also, in most cases you are also receiving a monthly rental credit from each of your monthly rental payments.  This is actually called a “rent credit”.  This is the monthly bonus you are getting each and every month that is applied toward the purchase of the home.  This enhances a timely payment to the landlord and is also a way that you are saving more toward the eventual purchase of the home.

At the time you are buying the original option payment and the monthly rental credits are tallied up and this goes toward the costs of you buying the home and the actual purchase price.  In many cases when you are ready to buy your costs are minimal to zero.  You have already prepaid those costs.

For more questions on how a lease option works please feel free to contact Kevin from this website.

Happy Investing,

Kevin A Dunlap

Owner/Manager Trident Investments Group and

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