When are Lease Option Homes Your Best Decision?

Lease option homes have been popular since the 1970's and are a unique way to convey the use of a property to another. Lease option agreements can be very beneficial in certain situations. If you are considering getting involved with a lease option, here are a few things that you will want to consider:

Lease Option Basics

You need to first understand how a lease option works. Basically, you are renting the house for a certain period of time, and then buying it. At the beginning of the term, the buyer pays the seller an option to purchase the home. The amount of money that they pay for the option is negotiable and could be as little as $1. This money is typically applied to the down payment on the property. The option money holds the property so that no one else can buy it during the option period. 

The option period is also negotiable but is typically one to three years in length. At the beginning of the term, you can negotiate the purchase price or that can be done after the option period is complete. Both parties then agree on a rent amount for the option period. Each month, a portion of the rent will go towards the purchase price of the house. 

Hot Real Estate Markets

One area where lease options could be beneficial is if you are dealing with a hot real estate market. If you are the potential buyer and you find a house that you like, a lease option could help you out. For whatever reason, you are not ready to buy the house immediately. However, you know that in three years, the property that you want is going to be worth more than it is now.

In this situation, a lease option could be the best approach. You can approach the seller and ask them if they would be open to this type of arrangement. You can negotiate the purchase price of the property and lock them into a favorable price for you. This way, in three years when you are ready to buy, you will be paying less for the property than you would be able to in that current market. 

Uncertainty

Another common situation that warrants a lease option is when you are uncertain about your future. You might have personal or family issues that make it impossible to predict where you will be a year from now. Instead of buying a house, a lease option could help you save some money. This way, if you decide to move to another area in a year, you simply pack up and move. Lease options give you the opportunity but not the obligation to buy the property at the end of the term. For example, if you are going through a divorce and want to buy a house, you can invest in a lease option and buy the house once the divorce is final.

blog comments powered by Disqus