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5 Tips to Start a Lease with Option to Purchase
By Pablo Gibson, an Associate editor with MortgageFit.com. He has been writing on financial topics over the years with special focus on American and European economy. Pablo also takes interest in mortagage related issues and contributes articles on mortgage refinance, mortgage loan calculation to personal finance blogs.
A lease with option to purchase is a lease that enables a renter the right to buy the property at a definite price within a certain time period. You pay a part of the rent for making the down payment in case of lease-option. The lease options are gaining popularity among the buyers who do no have sufficient money to make the down payment and the closing costs.
5 tips to start a lease with option to purchase
Have a look at the 5 ways to start a lease with option to purchase.
- Provide the necessary documents – In order to start a lease with option to buy with a renter, you will have to present the necessary documents. You need to have an Option agreement that safeguards you as an Optionor. There are many option forms present in favor of the Optionee. You should also make a Purchase Agreement along with the Option that will enable the renters to buy the property.
- Make use of an Option form – Being the landlord, the property will still be yours unless the renter pays you for the property and takes the full ownership. Make use of an Option form that is not recordable at the deeds office so that it may not get recorded against the public records of the properties. This will enable you to remain clear unless you sell off the property.
- Check the money you can collect from the renter – When you organize a lease with option, make sure to check the amount of money you can collect from the tenants into your state’s law. If you are a landlord, you’re allowed to collect half the rent from the tenant as a security deposit and you’ll have to give it back to the tenant when they move out from the house. If you do not want to return any money to the tenant, you need not take the security deposit from them while setting up a lease with option.
- Be sure to charge the market rent amount – While structuring the lease with option along with your renter, make sure that you charge the market rent amount from them. There are many landlords who seem to make mistakes. Since the tenant is planning to buy the house, it does not mean that the landlord will treat them in an extraordinary way. The landlord will still consider them to be a tenant and the renter can cancel the deal suddenly. In such a case, you are responsible for the property unless the tenant pays for it.
- Get the down payment from the tenant – You should make it a point to get the down payment from the tenant at the beginning of the agreement. The more the probable buyers may put down up front, the less chance they have to cancel since the risk for loss is greater if they do not follow it. Recognize the option fee for the sale price if they close, and if they do not close, let them know that this fee is non-refundable. In addition, cancel your option on your own in order to secure your rights if the tenants make a default in any of the terms of the standard rental agreement.
Apart from this, you may request the tenant to pay more than the present market value of your home. A Lease with Option enables you to make profit and a solution to sell off your property at good cost. By buying the home, the tenants get the suitable chance to become home owners and take pride in the property.
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