2 thoughts on “How does a lease option work? Where do you advertise to do one?”
Lease options can be done different ways the most basic is done with a contract for lease option and a purchase price is set with a time limit generally a year. The purchaser then gives option money to the seller when the contract is accepted by both parties. You would need to agree on an amount for the option money it could be $5000 or $10,000 or higher depending on the property value and where you live. Then there is a rent payment made every month and depending on the contract so much of the rent could be applied to the purchase price at the end of the lease term. It usually is only the amount of rent paid over fair market value rent for the area. So if rents were $1500 then you would collect say $1800 and $300 would be applied to the purchase. At the end of the lease term the buyer has the right to excerxise the lease or move out. If they elect to move out the option monies and rent monies applied are non-refundable. If they elect to purchase then those monies are applied to the down payment. In some states you would open escrow at the beginning of the lease just like you would with a sale of property. You can advertise lease options in your local newspaper or online, you can also hire a real estate agent to market the lease option for you. With an agent there would be less chances of any mistakes being made so you both parties are well protected.
A couple of other things depending on how your state laws are set. From lenders, we have gotten the renter’s applications as purchases and refinances depending on which way the lender wanted to look at the lease option. Recently we are seeing more of a push from the lenders that the lease option has to be recorded in the county court house just as any other mortgage document before they will even consider the application.
Lease options can be done different ways the most basic is done with a contract for lease option and a purchase price is set with a time limit generally a year. The purchaser then gives option money to the seller when the contract is accepted by both parties. You would need to agree on an amount for the option money it could be $5000 or $10,000 or higher depending on the property value and where you live. Then there is a rent payment made every month and depending on the contract so much of the rent could be applied to the purchase price at the end of the lease term. It usually is only the amount of rent paid over fair market value rent for the area. So if rents were $1500 then you would collect say $1800 and $300 would be applied to the purchase. At the end of the lease term the buyer has the right to excerxise the lease or move out. If they elect to move out the option monies and rent monies applied are non-refundable. If they elect to purchase then those monies are applied to the down payment. In some states you would open escrow at the beginning of the lease just like you would with a sale of property. You can advertise lease options in your local newspaper or online, you can also hire a real estate agent to market the lease option for you. With an agent there would be less chances of any mistakes being made so you both parties are well protected.
A couple of other things depending on how your state laws are set. From lenders, we have gotten the renter’s applications as purchases and refinances depending on which way the lender wanted to look at the lease option. Recently we are seeing more of a push from the lenders that the lease option has to be recorded in the county court house just as any other mortgage document before they will even consider the application.