Lease Options: Turning Renters to Partners

by Alexander Gordon - Date: 2006-12-26 - Word Count: 444 Share This!

Lease options which turn renters into partners is a means for people who cannot afford a huge down payment, but earn a steady and large income to become homeowners. When you lease or rent a property for a fixed mount of time, with an option to purchase it at a future date it is called as lease option. It is customary for a portion of the rent agreed upon, to be used as a future down payment for the home. However, if you fail to purchase the house the lessee may lose the option fee charged as per the agreement. The price of the property is fixed at the time of the agreement. They usually sign a lease option agreement with the leaser whereby they agree to have the legal right to buy the property within a certain period but are not required to purchase the property.

Advantages and Disadvantages of a Lease Option to Buyer.


A part of the rent is sometimes used as a down payment. Little cash is necessary initially unlike a direct purchase.

Property value may have increased buy the time the lease ends thus there are chances for huge profit.

Get to check the property before deciding to buy it.


They tend to lose the lease option fee if they forfeit the agreement.

They may end up paying far more than the current value of the property due to a shift in the property trends.

Advantages of a Lease Option to a Seller:

Ability to sell the house when the market is dull.

They can sell the house at a higher price than its current value.

They get a larger monthly payment than got for a normal lease.

If the agreement is forfeited they get to retain a sizeable option fee.

Tenants take good care of the property as they have a vested interest in it.

While signing a lease option agreement many things will be negotiated such as the price of the property, rent, if a portion of the rent will be used as a down payment, option considerations, repairs, closing costs etc. make sure the property is inspected for termites and other pest before signing the agreement. It is better to consult an experienced attorney to help you understand the agreement and to make sure there are no hidden clauses. Be sure you take an informed decision before signing the lease option as you may lose a lot of money if you are not able to go through with the agreement. It is better to get even the tiniest detail in writing as a precautionary measure.

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