Lease Purchase Agreement: Should a traditional lessor consider using this approach?

The way of doing things in the real estate sector has changed dramatically in the recent past, with the emergence of new strategies and transaction systems, an example of which is the lease purchase agreement.

The lease purchase agreement strategy finds the greatest appeal among people who would be interested in buying a home, but do not qualify for a traditional mortgage or simply do not want to pursue such a mortgage, even when they do qualify for one. . So, in a lease to purchase, which is sort of a cross between a traditional lease and a home purchase, the tenant of the home makes an agreement with the owner of the home so that he (the tenant ) lived in the house for a while. number of years (while, of course, they pay their rent), and at the expiration of this pre-agreed lease term, which is the lease, to gain exclusive rights to purchase the home. The homeowner, who is the landlord in this arrangement, meanwhile uses part of the money he receives as rent to repay the mortgage he could have taken to build (or buy) the house, and it is the fact that that you have contributed toward the mortgage payment on the home, giving the tenant the exclusive right to purchase the home at the expiration of the lease.

Now, the traditional landlord tends to be a person who simply builds structures, finds tenants in them, and periodically collects rental income from them, usually a significant portion of the rental income they collect goes to pay for housing financing. (for example, a mortgage). ), and usually also leave a reasonable markup for themselves after they have paid their periodic obligations on the financing that went into building (or buying) the house, as the case may be.

Different Traditional Owners tend to have different approaches to what to do with the home once they have paid off the financing that went toward building or purchasing the home, which is essentially your breakeven point. Depending on what the numbers suggest, some might decide that a better strategy might be to continue collecting rental income (with any part of the rent above the cost of maintaining the home essentially being their profit), while others might decide that a The best strategy for them would be to sell the house, with the full amount of the sale being essentially their profit, since they would have settled the financing payments that went towards building or buying the house.

Naturally, the latter type of traditional homeowner, the one who prefers to sell their homes after their initial investment is recovered, will tend to find the lease-to-own contract a more attractive option (since, at the very least, it gives them immediate access to the property). a virtually assured buyer when it comes to selling the house). Meanwhile, the first type of traditional landlord, the one who prefers to continue collecting rental income from the home after the financing that went into building the home has been fully paid off (rather than selling the home at this stage) might Finding the idea of ​​entering into a lease-purchase agreement incompatible with your basic strategy.