Lease Purchase

Lease Purchase

Can someone walk me through a Lease Purchase Scenario


Lease Purchase Scenario

Hi, JButcher,

Your inquiry is a bit old, but you may still be wondering.

Obviously, you can use a lease purchase, or lease with an option to purchase as it is usually called, when you own a property that you want to sell, but either you or the buyer wants to lease it for a while first. Or, use it when you want to buy a property but want to delay the purchase and be able to walk away from it if desired, and the seller is amenable.

If you are the seller, this is useful when you can't find a buyer willing to pay your price, but he will lease it and pay your price in a year or two and lease it in the meantime. If you are the buyer, you may get a property that needs fixing up, and you could find a renter who would let you work on it over time (or he would do the work - a bit iffy) and would pay you sufficient rent to cover the lease payments and maybe some extra. You'd need to have the right to sub-let, but you wouldn't have to pay taxes, insurance, or maintenance in the meantime.

The terms need to be worked out ahead of time, but (depending on the laws of your state) you would need to prepare a lease and a separate option to purchase. An option price needs to be paid (no contract without consideration), and the monthly amount that would be applied to the purchase price, plus the purchase price and the expiration date of the lease need to be stated. The lease would most likely mention or otherwise refer to the option.

Remember, it is just an option, meaning that the lessee doesn't have to complete the purchase. If he doesn't, he may be allowed to continue renting, make another lease, or be asked to move. For that reason, the lease payments may be a little above market rent.

Conceivably, a lease could be combined with a mandatory agreement to purchase at a later date, which your topic might have intended, but both parties would have to make sure all bases are covered by the terms and the consideration paid.

Options definitely have their place in your tool box, and of course they can be used without any lease, to tie up a property so you can get more data or delay the purchase, or let you walk away from the purchase.


Consideration, etc.

When a consideration is formed, how much would one make it for (as the seller). Probably a certain percentage range of the purchase price? When you receive the consideration and the lease payments how are they taxed? I know sometimes it's the lease + a certain amount goes toward the payment on the house, but not sure how all that works.

Here you go...

Here's the original post that explains the difference between the two, save it in your notes so you can refer to it when you need it.


Cool Elena Cool
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."