Lease Purchase or Rent With Option to Buy

The below topics are discussed in much more depth
on our members' Lease Purchase page

• Often used by owners and property managers as another tool to attract good tenants.
• Sometimes used by owners with a property they cannot rent or sell, at their price, any other way.
• Used by tenants to buy property, that they cannot buy, any other way.
• Used by smart real estate investors to control property, rather than own it.

Options are used a great deal in the real estate business

      Investors or site selectors are often willing to pay a premium to buy an option on property because they want to tie it up but are not willing to actually close on a purchase until some set of circumstances has been resolved.

      One reason for a landlord owner to enter into an option arrangement, is to attract a good tenant who does not want to think of themselves as a tenant.

      There are many other possible reasons to offer an option as well.

      Tenant/buyers who are attracted to options often have excessive debt or temporary credit glitches that they expect to be able to correct within the option period allowing them to get normal financing.

How do you do the deal?

      Unfortunately, many landlords may add a paragraph at the end of the lease that simply says: "Lessee may purchase the property within year one at $_____. within year two at $_____ , and so on. It may also say " Lessor agrees to apply $______ per month of the rent towards the down-payment and the purchase price."

      Simple contracts invite misinterpretation and litigation and a single option paragraph leaves too many questions unanswered.

A single agreement or two separate agreements can be executed, but there are numerous important clauses that must be included.

An example of a typical single agreement Lease Option can be found in RHOL's Forms Web under Leases.

      There is no risk-free way to buy or sell real estate, select a good tenant, or do a lease with option to purchase. But we believe the best way is usually to have two separate documents.

Utilizing options, some investors specialize in controlling, not owning real estate

      There can be benefits to buyers, sellers and tenants under the right circumstances.  Treat any option to buy real estate with a tenant just as you would with any other tenant, and with every potential buyer. When you give someone something of value ... get paid for it.

The above topics are discussed in much more depth
on our members' Lease Purchase page