What is a Lease Option, and is it Right for You?

What is a lease option?//www.nancyrealestateonline.com

What is a Lease Option, and is it right for you?

A lease option, also known as Lease with the Option to Purchase, is a type of contract between an owner and a tenant, in which the renter has the option of purchasing the property after a certain amount of time.

The Tenant and Landlord sign a lease for the home at a price they agree on, and simultaneously prepare the lease option. In Colorado, an attorney must draw up the lease option addendum, and Colorado-approved real estate forms must be used for the purchase.

Is this a beneficial way to buy or sell property? It certainly can be, as shown below.

Top Five Reasons to Think About Lease Options:

From the Buyer/Tenant’s Perspective:

  1. This may be an alternative to qualifying for a conventional mortgage – you can get into a house now, and not wait for 2-3 years or longer.
  2. A Percentage of your rental payment usually goes towards purchase – you don’t get that with a regular lease.
  3. You will know the house before you buy it – no surprises!
  4. You will need to offer a down payment that is not refundable – be aware that if you can’t buy, you forfeit your down payment.
  5. Seller/Landlord is responsible for all maintenance issues until you buy the home – you usually pay for the utilities.

From the Seller/Landlord’s Perspective:

Offering a lease option to a Buyer/Tenant may be a good move for you – you really can’t lose!

  1. If a Buyer/Tenant pays upfront earnest money and does not exercise the option to buy the house – you get to keep all the down payment.
  2. You keep all the tax benefits and write-offs until the home is sold.
  3. You agree on a selling price when you sign the lease option. If the market goes down, you win, but if the market goes up, you may lose that gain. You do receive rental money each month.  That amount should cover your mortgage costs.
  4. You have a Tenant/Buyer in your home that will take really good care of your home.

A lease option alternative will be more complex than a traditional purchase or property rental, but this may your best real estate alternative.  Let me know how I can help!

Nancy Page Cooper

Link Real Estate

 

The Top Ten Mistakes You Can Make When Leasing a Home

Looking for a place to rent? Consider these ‘hidden’ costs before signing a lease….

1) Not adding the cost of ‘Surprise’ utilities. I’m talking about the ones NOT included in your monthly rent when you calculate your payment. Trash, sewer, water, cable, electricity and gas can add several hundred dollars a month to your base rent. Are there HOA fees as well? If so, who pays them, you or the landlord?

2) Renting a home that does not fit into your lifestyle.   For example, if you hate to commute, don’t look at houses 45 minutes each way from your job. Make sure you take traffic patterns and school zones into account as well.

3) Signing a lease for too long a period to lock in a rent rate. Will you really need a 4-year lease on a home?

4) Not signing a lease if you rent from a friend or family member.  No matter how close you are, a rental agreement protects you both. When things are clearly spelled out on paper–who pays the sewer bill, who rakes the leaves–it’s easy to avoid misunderstandings.

5) Renting a home or apartment without a garage, especially if you hate cold weather!  If this means paying extra for a garage space or a carport, make sure you calculate that in to your monthly rent.

6) Not reading the ‘fine print’ on the lease.  What does ‘routine maintenance’ mean to you?  What does ‘end-of-lease cleaning’ or ‘carpet cleaning’ mean?

7) Not renting from a professional property manager.  In Colorado, you have to be a licensed realtor to manage property.  To make sure you are renting from a licensed Property Manager, ask for their Real Estate agent ID number.

8) Thinking that you can keep the home as messy as you want, inside and out. Owners/managers should make periodic inspections to ensure that you are taking good care of their home. Your landlord can begin eviction proceedings on anything they deem unsatisfactory if you don’t correct those issues in a short period of time.

9) Know about the Warrant of Habitability.  This law states that you are entitled to a certain level of living in your home such as heat, water, etc., or you can break the lease.  But be careful of demanding that work gets done in a non-realistic timeframe.

10) Thinking of yourself as a permanent renter.  The rental index is so high in Colorado now that it is almost cheaper for you to buy a home.  There are grants to help in down payments, loan repayments, etc.  Ask Link about some payment options, or work with a qualified mortgage counselor.  There are thousands of mortgage people just waiting for you to call.

Why not make this the last year you rent a house? If you are looking to rent, buy, sell, or need a Property Manager who really cares about you and your family, please give me a call! It would be my pleasure to help you with your housing needs.

Link gives you Real Estate Options!