Lease to Own


Old 04-25-07, 06:24 PM
Thread Starter
Join Date: Sep 2004
Location: us
Posts: 67
Lease to Own

I have a rental property, and getting ready to get a new tenant in. This tenant would like to do a lease to own option. How does this work and is there a specific lease agreement for this. I guess, I should say that I am in favor of this option since the house is also currently for sale.

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Old 04-25-07, 06:51 PM
Join Date: Aug 2000
Location: USA
Posts: 15,834
Lease to own contracts are usually used where a buyer wants to purchase a home, but due to credit issues would not qualify for financing. A written contract is signed by both you and the buyer. The contract stipulates the lease period, during or after which the tenant has the exclusive right to purchase the home at the agreed upon price. You should have a clause that states that this option can not be assigned to a third party. A downpayment/deposit is applied to the purchase of the home. This is non-refundable. The tenant also pays the usual amount of rent each month. A portion of the rent may or may not be applied to the purchase. The amount must be such that it at least covers your mortgage, if you have one, and taxes, and insurance on the property, and the amount required to go toward the purchase. Rent-to-own rates are usually higher than what you would normally charge. The tenant is responsible for all maintenance and repairs. Should the tenant decide not to buy or becomes unable to buy, you can extend the time period, convert the lease to your standard rental agreement, or end the contract with the tenant moving out. These are just some of the things that should be spelled out in the contract.

My landlord has sold some of his properties on land contract. I asked him if he had ever had anyone fall through on the contract and he got the property back. He said that he had not. (People who rent-to-own rarely carry through with the purchase.) I asked him how he could be so successful. He replied that the downpayment/deposit was large enough that the tenants did not want to lose their investment. Last week I learned that he had a tenant who bought on land contract had skipped out to Florida and had left the house in a state of disrepair. He was on the way to the court house to start the paper work to take possession of the home.

You can Google for lease-to-own contract forms. These are basic forms. It is best that you get an attorney to review your contract to make sure that you have everything covered in the contract and that you are protected in the event the lessor fails to come through with the purchase.

Some helpful reading:

Last edited by twelvepole; 04-25-07 at 07:07 PM.
Old 04-26-07, 08:08 PM
Join Date: Mar 2007
Posts: 75
Smile lease to own

twelvepole is correct. A lease to own is a lot like selling to a buyer/renter on land contract. You are essentially acting as the buyer's bank because he/she may have credit issues.

Typically the way you protect yourself as seller is to get a large down payment, charge a higher interest rate (watch out for usuary rules) and don't allow the contract to be assigned to someone else without your permission.

If the buyer skips town and or damages the place, insurance may cover it or the down payment can be used to fix the place.

Get a real estate attorney to help with this.

Good Luck!

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