Lease Option or Lease Purchase? How are they Different?

two hands holding lease to own homeWith more and more properties going into foreclosure with banks tightening up on their lending restrictions.

As such, it has opened up people to opportunities of opting for lease options instead of selling their houses.

Yes, this is another viable option that you can take especially if you’d want to conserve your equity and create positive cash flow in selling houses more quickly. Plus possibly getting fees from exercising the option consideration that is agreed upon by seller and buyer.

So What are Lease Options?

A lease option is a great way to sell houses proving to be beneficial for buyers as another great alternative in the business of marketing residential property aside from engaging on the real estate.

Basically another form of rent to own or lease to own, it allows buyers to buy their house by following the agreed period of lease years between seller and buyer.

The buyer is given the option and freedom to either purchase it or not at the agreed price. Put simply, it guarantees both parties interests, as primarily for the seller in securing and conserving their equity and getting monthly cash flow through rent.

On the buyer’s part, they are getting to use the property with an option of buying it at the end of the lease period. Or not if they find the property to depreciate in value, as paying a higher agreed home price than market value.

Nevertheless, it provides buyers a choice before making a decision on purchasing the home. All in all, a lease option would make a very good and secure option for sellers and buyers to take.

What is a Lease purchase?

Often a short-termed type of lease, it grants the buyer/holder to purchase the property at an agreed amount within a particular period of time it can be very similar to the lease option.

In a lease purchase there’s a certainty that the buyer, in this case, will definitely purchase the house.

Being obligated to buy the property as the terms follow unlike on lease options where there is the option to buy and they might not. Anyhow, when it comes to a lease purchase it can be very beneficial for both the sellers and buyers.

These are the following reasons why:

  • Sellers can use this option for hard-to-sell properties. As it usually offers buyers with little or no down payments attractive deal. Buyers in return get the opportunity to pay only a small amount for home ownership.
  • Buyers have the opportunity of making the most if not more of what they invest on lease payments by building a down payment in banking on the property to potentially appreciate beyond the agreed home price.
  • Sellers commonly get market value from today’s prices as well as relief in having to do away with mortgage payment on vacant property.

In conclusion, both property options of lease options and purchase are very powerful strategies that you can use in either selling or acquiring property which are all potentially useful for buyers, sellers and investors.