What Are the Benefits of a Lease Option?

Video Transcription

Travis Daggett with Cornerstone Properties talking again, today about lease options and what are the benefits if you’re a buyer buying a house using a lease option.

So generally a buyer for lease option, we call a tenant buyer because they’re going to be leasing it for a period of time, then they have an option to buy. So if you’re a tenant buyer, the advantage to you is number one, there’s probably something that’s on your credit that’s keeping you from qualifying for a loan right now, but your income is good.

So if you’re working with a credit counselor and a lender, which our tenant buyers are, then you have a pretty good idea about when your credit is going to be cleared up and you’re going to be able to purchase a home. Let’s say that’s a year down the road. So traditionally, you’d have to rent for a year or more and then look for a house to buy. A lease option allows you to find a house to buy now and actually purchase it in a year. But you don’t have to look in a year, that house that you find now, probably won’t be available in a year.

So you can find a property that you want to lease with an option to buy, your price is locked in, and this could be different, but generally this is how we structure it, your price that you have the option to purchase it at, is locked in when you sign the lease option agreement. So again, let’s say that’s a year down the road, then when that year is up and now you qualify for a loan, you have the option to purchase.

Now, let’s say that prices have gone up significantly, well, that’s good for you, you’re able to purchase it at a lower price than you otherwise would, we don’t see that in a huge way, generally, unless it’s a really longterm lease, like five years. It’s possible that prices have gone down, so it could be that you end up paying a little bit more than you would, but again, we don’t see that being a huge deal. And when you factor in having a place that you can lease with an option to purchase during that year, two, three, however long that time period is, being able to do improvements and being fairly confident that it’s gonna be your house. A lot of the times for most people, that’s offset.

So, you have a place that you’re able to lease during a period of time, then you know you’ll have the option to purchase it at a set price, those are really the big benefits and advantages for someone that’s purchasing a house using a lease option. Now, if you’re an investor, like we are, if you’re a company like we are that does this for a living, we will lease a property with an option to buy and we’ll actually manage the tenant. So we’ll put one of our tenant buyers in there, one of our clients in there, but we’ll manage them. So we’ll take care of maintenance, repairs, we’ll take care of any vacancies, that’s rare, collecting the rent, do all of that.

Advantages of Lease Options

So the advantage for the homeowner, in that case, they just get the benefits of collecting the rent, paying down their mortgage every month, they don’t have to manage anything. The tenant buyer has all their benefits and we, as the investor, we make our money, our profit from the buyer. So it doesn’t cost you, the homeowner anything to sell using a lease option.

Hope that gives you an overview of why lease options are becoming one of the top alternatives people are using to sell their house, especially in a market like this and even get full price without any fees or commissions.

Travis Daggett with Cornerstone Properties, see you next time. We’ll talk more about lease options. Thanks.

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