Comments on: Lease Options – Investor, Tenant, Agent: Win/Win/Win?

By: Staten Island Real Estate Agent

Staten Island Real Estate Agent — Fri, 17 Jul 2009 18:09:01 +0000

I was aware that there were other options for renters looking to own, but I wasn’t clear on the details. I never researched this further but I will now. This is definitely something i need to get more inform on. Thank your great post!

By: Pattie

Pattie — Mon, 08 Sep 2008 23:24:01 +0000

Does the lessee in these cases qualify for income tax deducion on fed documents? If so is it the full amount? Do these leases qualify for FASBA 13?

By: ARDELL

ARDELL — Fri, 29 Aug 2008 20:05:52 +0000

I will do that Roger. 3rd parties are used when the payments “wrap” the mortgage, which is not necessarily an Option to buy OR a lease purchase. So I’ll try to cover all three scenarios. The 3rd part wrap is used most often when the amount of the rent is equal to the seller’s mortgage payment.

By: Roger Ingalls

Roger Ingalls — Fri, 29 Aug 2008 19:50:37 +0000

Ardell:

That’ll teach me not to read the whole string!

I have not heard of the True Lease Purchase before.

Since this post is so old, and you say that this is a perfect solution for current market, maybe you could do a new piece on the subject?

From the lending perspective, the initial transaction would clearly be considered an investment purchase. Do you know how would financing play out for the tenants at the end of the lease? Do the tenants have to accumulate the down payment somewhere, or do they get to use the equity in the home, as in the Lease with Option to Purchase, for the downpayment?

And clearly, in both types, it is wiser to have the rents paid into an escrow/3rd party, as it provides protection for both parties, and a much cleaner paper trail for VOM’s, and establishing equitiable interest.

Thanks for jumping in there!

By: ARDELL

ARDELL — Fri, 29 Aug 2008 18:50:09 +0000

Craig,

Disclose to whom?

Roger,

I disagree. Lease Purchase was traditionally a way for someone to accumulate sufficient down monies (even the small amount FHA requires), so that they could buy it at some point down the road.

There is much confusion between a lease with an Option to Buy (which does not make sense right now) and a Lease Purchase which makes mega sense right now. Unfortunately most common practice combines these with pieces of one and pieces of the other and calls it Lease Purchase. A TRUE lease purchase is perfect for what ails this market, if only people understood what its intended use is and how to do one.

By: Roger Ingalls

Roger Ingalls — Fri, 29 Aug 2008 18:39:02 +0000

The popularity of the lease to own may be waning a bit.

One of the best features was the ability to participate in the growing equity, with property values rising rapidly. That does not seem to be the case today.

The other nice feature was that some lenders would allow the buyer to complete the transaction at the termination of the lease, and use the HIGHER of sale price or appraised value to base the loan upon, thus allowing the buyer to qualify for 90% financing without an immediate infusion of 10% cash down.

In ALL other cases, the lender will use the LOWER of sales price or appraised value.

I do not think there are many (if any) lenders left that will still do that program.

By: Craig Shipman

Craig Shipman — Fri, 29 Aug 2008 15:25:14 +0000

When you do a lease option with the intent to purchase does the owner have to disclose as if it were a sale?

By: Deborah Burns

Deborah Burns — Tue, 15 Jan 2008 01:42:49 +0000

Hi Michele,

I’m not sure that Eric is in Real Estate any more, though he might still recieve emails on his posts, so he may contact you with information which could help you. I saw your question on the side bar and wanted to give you some kind of answer before it disappeared, and you got no response. If Eric doesn’t contact you in a few days email me, and I will see if I help you with some answers.

By: Michele

Michele — Mon, 14 Jan 2008 22:10:45 +0000

Hello,
I’m just reading Eric’s post on lease/rent to own opportunities in the Seattle area.

Eric – I would like to reach you to see if you are still working on deals like these? We have been “serial renters” for over 10 years, and now need to find another place to live by March 1st. We’re currently on Queen Anne and would like to stay. I see dozens of condos and other properties that seem to be sitting empty that are for sale. I would love to work with someone that might be able to help us break our cycle of renting (and moving!) with a potential lease to own option. Can you contact me? Many thanks!

By: Michelle

Michelle — Fri, 21 Sep 2007 01:00:34 +0000

My Husband and I entered into a Lease Purchase Agreement in Texas using an Agent who in turn found us an Investor from another state. We paid a large amount of money upfront as down payment and for upgrades to the home. The Investor purchased the home and we pay montly rent. We were told by the Agent that we would be able to purchase the home in 12 months and that a certain amount would be credited toward the purchase. We are now at the end of the lease and are not able to qualify for a Mortgage Loan to purchase the home. How do we get our monies back from the Investor and/or Agent??. Were we scammed!!!