The question is: As a buyer, how does lease purchasing work and how can it benefit my family?
Let's start with the benefits. The lease purchase, rent-to-own, or lease option all work in similar ways. First, consider how a standard real estate purchase works. You and your family decide that it's time to move. So you look in the paper, online, and maybe get an agent to help in the process. You find the home of your dreams that's in your price range in a nice community. Often, you go through a negotiation process, which involves offers and counter-offers, until you eventually come to an agreement. You decide on a closing date usually thirty days. Now the fun begins. You contact a bank or mortgage broker, who let's you know that you are going to need anywhere from 10-30% or more down, good credit if you want a good interest rate and copies of all of your income statements and W-2's for the last two years. But what happens if you don't currently have that much to put down or have some dings on your credit, even as far as seven years back? When it comes to your income, what happens if you switched jobs, got laid off, didn't make that bonus or decided to start a business? The credit process can be a daunting task, and is a major reason for deals falling through. Don't forget, if you get past the funding gauntlet, you still have to have inspections and appraisals done all within the next 30 days and hope all of your time and energy wasn't wasted on a cracked foundation.
But what if there was another way? What if buying a home wasn't a 30 day whirlwind process, but a long-term arrangement that allowed you to put your rent money to work, check out the home, check out the neighborhood and schools, and get comfortable in your new home before making the HUGE decision of purchasing a property? What if you didn't need good credit, bank qualifying, or large sums of money on a down payment? What if you had years to do inspections, secure financing on your terms, and be in control of the property? There is such a vehicle and it is lease purchasing.
Do any of these apply to you?:
Credit or employment issues
Previously laid off or switched jobs
Need time to fix or establish credit
Want time to inspect the neighborhood and/or schools
Want the opportunity to wait for and secure the best financing possible
Time to inspect the property
Need time to save money for a down payment
Don't want to continue wasting money on rent
Want to build equity in a property
New to the area you are looking at
Want CONTROL over your future and your finances
Want to get into homeownership as quickly and easily as possible
Have suffered a foreclosure, divorce, or bankruptcy
Our program was specifically designed with you in mind.
So how does lease purchasing work? We constantly strive to find quality homes in quality neighborhoods. We secure lease purchase terms that are advantageous to tenant/buyers and help create homeownership. Typically lease option homes offer rent credits of up to 50% or more and require as little as 1% - 5% down as "option consideration." Option consideration is credited towards the purchase of the home; however, this is not a deposit. It is a non-refundable commitment towards your future home. So let's break this down...
Let's say there is a 3 bedroom/ 2 bath home available in a great neighborhood. The lease is a two year term with monthly rent of $2000 with 50% rent credits. The purchase price of the home if the option is exercised is $400,000. The option consideration is $10,000 or 2.5% of the purchase price. This is how it looks:
$400,000 Locked in purchase price
- 24,000 Accumulated rent credits for 2 years
- 10,000 Option Consideration
$ 366,000 Net purchase price after 2 years
So instead of losing $48,000 in rental payments. That's right, amazing isn't it? You have created $34,000 worth of equity in a property that you've been able to inspect, meet the neighbors and make your own. Not to mention the possibility that there may have been appreciation in the market. Let's add a conservative 5% annual appreciation and suddenly you owe $366,000 on a property worth $440,000! That's $74,000 in your pocket before you've even closed escrow.
Sounds great, but there has to be a catch, right? You're right, there is a catch, but it's not what you think. The first catch is that the rent has to be on time, every month or you lose your rent credits for that month. The second catch is that in most instances, you are responsible for the day to day maintenance on the property. If a toilet backs up, the faucet leaks or the garbage disposal backs up, it is your responsibility. No more than regular home ownership issues.
What's the next the step? Contact James Consulting Group to discuss your own unique situation and we can send you a copy of our latest properties. We can also create a personalized profile for you through our Preferred Client Notification System which allows you to receive instant notification on available properties that fit your family's needs. No need to constantly check websites or listings.
When a home is located that satisfies your needs, there is a quick application process that occurs and a one-on-one consultation with one of our dedicated representatives. James Consulting Group is dedicated to helping buyers and sellers find each other without needless negotiations or hassles. Lease purchasing is a true 'win/win' situation. Let us know how we can help you today.
If you or someone you know has a home to sell quickly, check out our Seller's page.