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Lease Options And How To Turn Renters Into Partners

Aug 17, 2007
Lease options, which turn renters into partners is a method for people who cannot afford a huge down payment, but earn a steady and large income to become homeowners. When you lease or rent a property for a fixed amount of time, with an option to purchase it at a future date, this is known as a lease option. It is customary for a portion of the rent agreed upon to be used as a future down payment for the home. However, if you fail to purchase the house the owner may lose the option fee charged according to the agreement. The price of the property is fixed at the time of the agreement. The owner usually signs a lease option agreement with the leaser, whereby the parties agree to have that the renters possess a legal right to buy the property within a certain period, but are not required to purchase the property.
Advantages and Disadvantages of a Lease Option to Buyer


A part of the rent that the leasers pay can be used as a down payment. Little cash is necessary initially unlike a direct purchase.

The property value may increase by the time the lease ends. Thus there are chances for huge profit.

The buyer gets to check the property before deciding to buy it.


The leasers tend to lose the lease option fee if they forfeit the agreement.

The leasers may end up paying far more than the current value of the property due to a shift in the property trends.

Advantages Of A Lease Option To A Seller

The seller possesses the ability to sell the house when the market is dull.

The seller can sell the house at a higher price than its current value.

The seller gets a larger monthly payment than for a normal lease.

If the agreement is forfeited the seller gets to retain a sizeable option fee.

Tenants usually take good care of the property as they have a vested interest in it.

When signing a lease option agreement many things must be negotiated such as the price of the property, rent, whether a portion of the rent will be used as a down payment, option considerations, repairs, and closing costs. Be certain to have the property inspected for termites and other pests before signing the agreement. It is best to consult an experienced attorney, who can help you understand the agreement. You must be certain there are no hidden clauses. Be sure you make an informed decision when signing the lease option since you may lose a lot of money if you are not able to go through with the agreement. It is best to get even the tiniest details in writing as a precautionary measure.

Additional Help
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About the Author
David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
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