Leasing Agreement

Lease-to Buy – An Alternate to Outright Buying!


Many people who want to own but are unable to arrange down payments or afford monthly mortgages as yet, are seriously considering leasing a piece of land. This option allows renting under a leasing agreement, and at the end of the lease period, they have the option to purchase and own it.

The lease-to-buy option provides future homeowners with poor credit a great opportunity to mend their damaged credit history in anticipation of future homeownership. At the same time, owners of currently vacant property get the chance to earn some income through leasing.

The lease-to-buy approach is a great way for aspiring homeowners to give future homeownership a test drive. By leasing, you will be able to confirm your appetite for the ultimate costs and responsibilities that are to come with ownership.

This concept of selling is becoming popular with both individual owners as well as mainstream developers who are trying to offload their excess inventory. Buying investment property Dallas becomes an easier task for the target market when all the conditions are correct.

According to Eric Gedstad, who works at Boston-based mass housing as its corporate communications manager, the condominium market in the city is rather weak these days. As a result, developers wishing to sell their property are also giving rent-to-own approaches a try. One option gives renters the right of first refusal on units they are renting, if they opt to buy the unit within the next year.

While leasing-to-buy is a great way to gain eventual homeownership, it is essential to understand how this option works. To ensure your interests are protected in any lease-to-buy agreement, you should seek expert advice. Some information that might help you is provided below:

Usually, lease-to-buy agreements allow renters an option to buy property at a certain price after a stipulated time of renting, by requiring the tenant to make an up-front non-refundable payment. Sellers usually allow aspiring buyers to off-set a percentage of their monthly rental payments towards this down payment.

The renter/buyer gains from this arrangement because:

Under the agreement, during the stipulated period, only the renter is provided the option to purchase it.

The agreement allows you to apply a portion of your recurring lease/rental payment towards building equity, and allows the equity built up to fund the down payment required to buy.

Contractually, upon the expiry of the lease, you have the option – though not an obligation – to buy the leased residential investment property.

Often, you are allowed to exercise your right to buy at any time during the currency of your contract.

This offers an ideal opportunity to test drive ultimate ownership of residential real estate investment Dallas.

This arrangement works well in a seller’s market, when prices are on the rise, because you would have locked in your purchase price at a historically low level. However, in case of a depreciating trend in prices, you may be adversely impacted.

You have a chance to clean up your credit history and build equity. This offers you and ideal opportunity to rebuild damaged credit ratings by building up equity.

The seller/owner gains from this arrangement because:

It provides a great opportunity for quick cash flow, and an opportunity to subsequently offload to the renter.

Should the renter exercise the right not to buy, the seller gets to retain the option fee paid up front.

This broadens your base of potential buyers because you can now target traditional renters as well as future buyers.

Current tenants take better care of the property that they know they could potentially soon own.

As the owner, while tenants rent the home, you maintain all the tax-shelter advantages the property has to offer.

It offers some degree of solace to know that the existing tenants of your are actively interested in buying the property off you.

Points to note for lease-to-buy options:

Have the inspected by a professional home inspector, and maintain photographic records if possible.

It is important to stay current with all payments – insurance, mortgage, taxes – related to your home.

Ensure the possible buyer that it does not carry any outstanding leans against it.

Highlight terms and conditions governing the rights/obligations of the renter in case they decide to decline buying from you.

Just like a sales contract, make sure your contract has all the details in writing for a complete record.

Prepare a draft of an undated and unsigned purchase agreement. Ensure you have a draft, although undated, contract ready.

To avoid any future pitfalls in a lease-to-buy option residential real estate investment Dallas, it is always advisable to seek professional help.