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Real Estate - Lease Purchasing
What is Lease Purchasing? – Real Estate
In simple terms, a lease purchase allows the person renting the property to ultimately
become the owner of the property. This is how it is usually done. When the rental
lease is signed, an agreement is included, which gives the person renting the property
the option to purchase the property before the end of the lease. The buyer pays
the seller an amount which is near about the same as the monthly rent for the property.
A percentage of this payment goes towards the purchase payment for the property.
At the end of the lease, the buyer can purchase the property as per the terms mentioned
in the agreement. The purchase contract (agreement signed along with the rental
lease) is a pre negotiated contract for purchase of the property and contains items
such as the sale price, time period of rental, details of how the payment will be
carried out, and so on. Note that the lease purchase option gives you the right
to buy the property, without the obligation to buy it.
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Real Estate - Benefits of Lease Purchase for the Buyer
There obvious benefits in lease purchasing property for the buyer. For example,
your rent money is being utilized towards purchase of the property. The purchase
price is fixed ahead of time and profits due to property price increase in the future
are yours. You have sufficient time to look for the best financing options. The
down payments are low and poor credit history is usually not a problem. During the
renting period, you are responsible only for minor repair problems. You have sufficient
time to check out whether the house is really suitable for you, for example you
can find out if the property has any major faults, is the neighborhood to your liking,
and so on.
Real Estate - Benefits of Lease Purchase for the Seller / Investor
There are also major benefits to the seller or the real estate investor in using
the lease purchase scheme. The lease purchase option fetches the highest rent for
the property and gets tenants of good quality. The sale price of the property is
also usually the highest while maintaining the tax benefits of such a scheme. The
risk involved is very low and hardly any capital or credit is required. It can be
an excellent option for a home or part time business.
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