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What is a Rent 2 Own? 

Rent 2 Own a Home

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Rent 2 Own is also known as a Lease Option or a Lease Purchase.

A Lease Purchase Agreement (Rent 2 Own Agreement) is an agreement that combines the right of occupancy (the Lease Agreement) with the Right to Purchase property at an agreed upon price (the Option to Buy Agreement).

Lease + Option to Purchase = Lease 2 Purchase Agreement

Why Rent 2 Own?   Here's Why:

Tenant/Buyer Benefits

If you are in the market to buy a home, you are probably aware of the advantages home ownership provides (tax shelter, appreciation, security, etc). If you are actively seeking homes for sale on a Lease Purchase agreement, you either 

  • cannot purchase a home through conventional means, 
    • you need time to:
      • Establish credit (if you just moved to town)
      • Clean up some minor credit problems
      • Save for a down payment
      • Find a more affordable loan (after your credit is improved)
  • are not ready to make a commitment, 

The Lease Purchase contract provides you with many features and benefits, but perhaps the most powerful one is the rate at which you accumulate equity. Compare any lender's loan amortization schedule to that of a Lease Purchase contract and you'll quickly see that the Lease Purchase contract wins hands-down -- every time. Moreover, the buying power of a Lease Purchase contract can quickly and easily land you a home that you would never qualify for the conventional way.

Here are some features and benefits for the tenant/buyer:

  • Faster Equity Growth: Equity accumulates much faster than with conventional financing through a bank or lender.

  • Rent Money is Working Toward the Purchase of the Home: Every month a portion of your rent payment (typically $300-$800, depending on the home) is credited towards your down payment or off of the sales price.

  • Option Consideration is Credited Towards the Purchase of the Home: When you sign a Lease Purchase contract, you will pay the seller an option deposit. This money is your vested interest in the home and will be fully (100%) credited to you when you buy the home.

  • Minimum Cash Out of Pocket: When you purchase a home conventionally, you must pay 5% - 20% down plus closing costs and pre-paids. When you buy with a Lease Purchase, you only pay first month's rent, a security deposit and a 1% to 3%.option deposit.

  • Frequently No Down Payment at Closing: Since you have given the seller an option deposit and you have been receiving monthly rent credits, there will frequently be very little or nothing left to pay for a down payment at closing.

  • Profits from Appreciation: Since the sales price is locked in before closing (as specified in your agreement), any increase in property value will mean that your equity (what you owe minus what it's worth) is increasing in the home .

  • Increased Buying Power: When you buy a Lease Purchase home, you only pay first month's rent, a security deposit and a 1% to 3% option deposit. Compare that to a typical bank or lender who requires 5% to 20% down plus closing costs and pre - paids.

  • Credit Problems are Okay: Qualification restrictions simply do not exist. You will be approved at the sole discretion of the seller.

  • No Lengthy Escrows or Mortgage Approvals: Your approval will be based solely at the discretion of the seller instead of a lender who can take up to a month (or longer) to render a decision.

  • Control of the Home: You will be put in full legal control of the home for a specified period of time without actually having to own it.

  • No Taxes, Less Liability: Since you do not own the home (yet), you will not have to pay property taxes and your liability exposure will be dramatically reduced.

  • Quick Move In Time: You can typically take possession of the home in less than one week instead of conventional move in times of one to three months after your offer was accepted.

  • Maximum Leverage: You are spending very little money to control a very expensive, and very profitable, piece of real estate.

  • Time: Before you actually buy the home, you will have 12-24 months or more (depending on your agreement) to repair your credit, find the best interest rates, investigate the home and research the neighborhood and/or schools.

  • Minimal Maintenance: Large maintenance problems or any maintenance problems that exceed a certain amount of money are delegated to the seller.

  • Privacy: Your name will not be on the deed until you exercise your option to buy.

  • Peace of Mind: You will have full control of the home.
     
  • Gar C. May Real Estate Broker  Ca. dre # 479003