What Is A Lease/Purchase?
A lease-to-own house purchase (also "rent-to-own purchase" or "lease purchase") is a lease combined with an option to purchase the property within a specified period, usually 3 years or less, at an agreed-upon price. The borrower pays an option fee and a deposit, which is credited to the purchase price. The borrower pays rent, and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses the deposit including the option fee and the rent premium.
Lease-purchase deals can be structured in such a way that all parties benefit. Lease-purchase plans have a solid economic rationale. A lease-purchase has 6 major provisions. The sale price of the house and the rent are market-determined, yet subject to negotiation just as in a straight purchase or rental transaction.
Buyers generally prefer a long option period because it provides more time to build equity,increase appreciation, and repair credit. A long period can boomerang on them, however, if they are never able to exercise the option, since they lose the rent premium they have been paying all the while plus their option fee. Sellers generally prefer a short option period, but if it is too short, the house won’t be sold.
The option fee and rent premium are viewed differently by buyers and sellers. To the buyer, they are part of the equity in the house they will soon own. Fully anticipating that they will exercise the option, the only cost is the interest they would otherwise have earned. To sellers, however, these payments are the best guarantee that their houses will sell; if they don’t sell, the payments are retained as income. That the benefit to the seller generally exceeds the cost to the buyer makes the lease-to-own deal a possible win-win.
A lease-purchase also may give the renter/buyer the right to assign the option to buy. This will usually have considerable value to the buyer, because it means that the option can be sold in the event that it has value but the buyer is not able to exercise it. It is a cost to the seller for the same reason.
A possible alternative to a lease/purchase deal for consumers with poor credit and/or no cash is a sub-prime loan. The high-cost sub-prime market, which actively solicited clients and victimized many, was pretty much gone by 2008 but sub-prime loans continue to be available at reasonable prices from community groups or state and local finance agencies. Borrowers have to search out these sources, but if they can qualify for a loan from one, it is probably a better route than a lease/purchase.
The lease-purchase offers homeownership opportunities to consumers who can't qualify for a loan from any source, but who are prepared to bet on themselves. The bet is that before the option period expires, they will qualify for the mortgage they need to exercise the purchase option. During the option period, they have the opportunity to rebuild their credit and accumulate equity while living in the house.
Even though it is costly, the right not to exercise the option is of value to buyers. If there is something seriously wrong with the house, neighborhood, or neighbors, the money left behind on a lease-purchase is much smaller than the cost of an outright purchase followed by a quick sale.
Jun 26, 2009
Raise Your Credit Score
A friend of mine recently told me that she raised her credit score from 500 to 750 in one year! She did it by paying off all existing credit cards and closing them out. You could also combine them into one. Then she opened a gas card. It must be an American gas company such as Texico, Chervon, Exxon, Mobil, or Shell. Every time you charge on the card and pay it off, you get a point added to your score. Of course, she payed all bills on time! Thanks Leona for sharing.
A friend of mine recently told me that she raised her credit score from 500 to 750 in one year! She did it by paying off all existing credit cards and closing them out. You could also combine them into one. Then she opened a gas card. It must be an American gas company such as Texico, Chervon, Exxon, Mobil, or Shell. Every time you charge on the card and pay it off, you get a point added to your score. Of course, she payed all bills on time! Thanks Leona for sharing.
A True Win-Win Situation
Without a doubt, the Lease 2 Purchase contract is the quickest, easiest and least expensive way to buy, sell and invest in real estate.
It replaces the typical adversarial relationship that usually exists between buyers and sellers with a win-win method of transferring real estate ownership. As a result, it is highly prized by those who know about its powerful features and benefits.
Specifically (if you're the buyer), you will have minimum cash out of pocket, credit problems are okay, faster equity growth, increased buying power, time to kick the tires and peace of mind.
Specifically (if you're the seller), you will have a top sales price -- even if demand is low, positive cash flow, the largest market of buyers, minimum risk, no commissions or fees, no maintenance, no land lording and in case of default, a non-refundable deposit.
Without a doubt, the Lease 2 Purchase contract is the quickest, easiest and least expensive way to buy, sell and invest in real estate.
It replaces the typical adversarial relationship that usually exists between buyers and sellers with a win-win method of transferring real estate ownership. As a result, it is highly prized by those who know about its powerful features and benefits.
Specifically (if you're the buyer), you will have minimum cash out of pocket, credit problems are okay, faster equity growth, increased buying power, time to kick the tires and peace of mind.
Specifically (if you're the seller), you will have a top sales price -- even if demand is low, positive cash flow, the largest market of buyers, minimum risk, no commissions or fees, no maintenance, no land lording and in case of default, a non-refundable deposit.
Keep $ In your Pocket with Preventative Maintenance
Preventive maintenance can mean the difference between maintaining the value in your home or depleting the equity you might have gained; keeping hard earned cash in your pocket, or throwing it into the wind with an unnecessary or unexpected expense.
The best way to help maintain any appreciation and protect your investment is to do minor routine tasks, proactively and systematically, to help keep the home operating and functioning normally. Avoiding major operating malfunctions or complete failures can easily be avoided if homeowners take just a few minutes to do some routine minor household tasks.
Many of these items can be done by the homeowner, cutting costs significantly, although the cost of hiring a professional is usually better than not performing the maintenance at all. Having to spend money on replacement appliances and installation costs can be several times more costly than the simple maintenance of them.
Maintenance Check-List
1. __ Service heat&a/c system once a year.
2. __ Change the filters in your heat&a/c system once a month.
3. __ Drain hot water heater once a year.
4. __ Don't leave light sockets without bulbs.
5. __ Periodically run a pitcher of ice cubes through garbage disposal to sharpen blades.
6. __ Replace dripping faucets immediately to conserve water.
7. __ Don't allow toilet tanks to drip - replace ballcock
assembly.
8. __ Check weather stripping around doors for air leaks.
9. __ Visually look at roof after high winds to detect loose shingles.
10.__ Visually look around outside roof line to find holes where animals might enter.
11.__ Check batteries in smoke detectors monthly/replace annually.
12.__ Wrap outside pipes in winter to prevent freezing.
13.__ Remove garden hose from outside faucet in winter.
14.__ Water around foundation during dry periods to prevent
cracking or shifting.
REMEMBER: better maintained homes sell faster and for higher prices
Preventive maintenance can mean the difference between maintaining the value in your home or depleting the equity you might have gained; keeping hard earned cash in your pocket, or throwing it into the wind with an unnecessary or unexpected expense.
The best way to help maintain any appreciation and protect your investment is to do minor routine tasks, proactively and systematically, to help keep the home operating and functioning normally. Avoiding major operating malfunctions or complete failures can easily be avoided if homeowners take just a few minutes to do some routine minor household tasks.
Many of these items can be done by the homeowner, cutting costs significantly, although the cost of hiring a professional is usually better than not performing the maintenance at all. Having to spend money on replacement appliances and installation costs can be several times more costly than the simple maintenance of them.
Maintenance Check-List
1. __ Service heat&a/c system once a year.
2. __ Change the filters in your heat&a/c system once a month.
3. __ Drain hot water heater once a year.
4. __ Don't leave light sockets without bulbs.
5. __ Periodically run a pitcher of ice cubes through garbage disposal to sharpen blades.
6. __ Replace dripping faucets immediately to conserve water.
7. __ Don't allow toilet tanks to drip - replace ballcock
assembly.
8. __ Check weather stripping around doors for air leaks.
9. __ Visually look at roof after high winds to detect loose shingles.
10.__ Visually look around outside roof line to find holes where animals might enter.
11.__ Check batteries in smoke detectors monthly/replace annually.
12.__ Wrap outside pipes in winter to prevent freezing.
13.__ Remove garden hose from outside faucet in winter.
14.__ Water around foundation during dry periods to prevent
cracking or shifting.
REMEMBER: better maintained homes sell faster and for higher prices
Jun 25, 2009
5 Tips To Make Moving Easier
1) Get Estimates - Be very careful who you hire! Always remember you get what you pay for and always read what you sign. Have a few reputable moving companies come and give you estimates. Some do flat rate, by the pound, by the hour, and others by the size of the home and estimated sq footage needed in truck space. Be very clear as to which plan you are agreeing to and ask as many question you need to until you get the clarity you are looking for. Driving time usually gets added after a certain distance so always factor that in as well. Another great way to choose a mover is by referral, we all know word of mouth is always the best referral.
2) Clean Out Prior To The Move - Have a tag sale, moving sale, any kind of sale that will help clear out all your unwanted salable stuff. Other ways to lighten the load are charitable donations, depending on the condition alot of companies will come and pick up the stuff. Also get rid of anything before you move, there is no sense in bringing unwanted stuff to the new place and getting rid of it there. All that does is add to your bill and headache. This may sound like a no-brainer but I can tell you first hand it's not.
3) Pack - If you can, try to do as much of the packing yourself otherwise you will pay by the hour for the professionals. Between materials and man power the hours will add up. If you have to go this route then you do but if you don't save yourself some money. Anything that can go in a box will make the loading of the truck much easier. When it comes to packing boxes the trick is to pack it tightly so that NOTHING moves once closed. It's the shifting or jingling of fragile items that cause the breaks. Start by stuffing all bottom corners and coat the bottom of the box with crumpled newspaper to make it more of a cushion. Always pack glasses and dishes straight up and down, NEVER flat. Think of it as you would an egg, staright up and down is much harder to break then laying flat. Always wrap the glassware in a couple of sheets of newspaper to act as a buffer for the next dish or glass. Once packed stuff all open holes with paper to make a tight fit, then crumple a bunch more to completely fill the top until the box closes tightly. Remember the movers will stack the box so you don't want there to be any give in the top of the box. Let the movers handle anything you are scared to wrap as they can do a few things the day of the move, but don't save a ton of packing for the day of, do as much as possible prior. ALWAYS label the box with the items inside and the ROOM they will go in at the new home.
4) Measure And Label - Try to measure doorways in your new home prior so you can catch any potential problems for furniture that won't fit or go upstairs. Having the movers strategize and attempt the difficult can eat up alot of moving time and cost you more money. If you can remove any handrails in the home if you think furniture going up or downstairs my have a problem getting by. Also try to label each room so that once the movers exit the truck with an item you can stand by the door and tell them what room and all they have to do is look for the sign on the doorway.
5)Don't Stress - Most think moving is a very stressful experience, for some it is. I'm here to tell you it doesn't have to be. Most feel this way because they don't know where to begin and get completely overwhelmed. If you have a plan in advance and
1) Get Estimates - Be very careful who you hire! Always remember you get what you pay for and always read what you sign. Have a few reputable moving companies come and give you estimates. Some do flat rate, by the pound, by the hour, and others by the size of the home and estimated sq footage needed in truck space. Be very clear as to which plan you are agreeing to and ask as many question you need to until you get the clarity you are looking for. Driving time usually gets added after a certain distance so always factor that in as well. Another great way to choose a mover is by referral, we all know word of mouth is always the best referral.
2) Clean Out Prior To The Move - Have a tag sale, moving sale, any kind of sale that will help clear out all your unwanted salable stuff. Other ways to lighten the load are charitable donations, depending on the condition alot of companies will come and pick up the stuff. Also get rid of anything before you move, there is no sense in bringing unwanted stuff to the new place and getting rid of it there. All that does is add to your bill and headache. This may sound like a no-brainer but I can tell you first hand it's not.
3) Pack - If you can, try to do as much of the packing yourself otherwise you will pay by the hour for the professionals. Between materials and man power the hours will add up. If you have to go this route then you do but if you don't save yourself some money. Anything that can go in a box will make the loading of the truck much easier. When it comes to packing boxes the trick is to pack it tightly so that NOTHING moves once closed. It's the shifting or jingling of fragile items that cause the breaks. Start by stuffing all bottom corners and coat the bottom of the box with crumpled newspaper to make it more of a cushion. Always pack glasses and dishes straight up and down, NEVER flat. Think of it as you would an egg, staright up and down is much harder to break then laying flat. Always wrap the glassware in a couple of sheets of newspaper to act as a buffer for the next dish or glass. Once packed stuff all open holes with paper to make a tight fit, then crumple a bunch more to completely fill the top until the box closes tightly. Remember the movers will stack the box so you don't want there to be any give in the top of the box. Let the movers handle anything you are scared to wrap as they can do a few things the day of the move, but don't save a ton of packing for the day of, do as much as possible prior. ALWAYS label the box with the items inside and the ROOM they will go in at the new home.
4) Measure And Label - Try to measure doorways in your new home prior so you can catch any potential problems for furniture that won't fit or go upstairs. Having the movers strategize and attempt the difficult can eat up alot of moving time and cost you more money. If you can remove any handrails in the home if you think furniture going up or downstairs my have a problem getting by. Also try to label each room so that once the movers exit the truck with an item you can stand by the door and tell them what room and all they have to do is look for the sign on the doorway.
5)Don't Stress - Most think moving is a very stressful experience, for some it is. I'm here to tell you it doesn't have to be. Most feel this way because they don't know where to begin and get completely overwhelmed. If you have a plan in advance and
Tenant/Buyer Features & Benefits
If you are in the market to buy a home, you are probably aware of the advantages home ownership provides (tax shelter, appreciation, security, etc). If you are actively seeking homes for sale on a Lease/Purchase agreement, you are either (1) a very smart renter, (2) a very smart real estate investor, (3) not ready to make a commitment, (4) cannot yet purchase a home through conventional means or (5) any combination of the aforementioned.
The Lease/Purchase contract provides you with many features and benefits, but perhaps the most powerful one is the rate at which you accumulate equity. Compare any lender's loan amortization schedule to that of a Lease/Purchase contract and you'll quickly see that the Lease/Purchase contract wins hands-down -- every time. Moreover, the buying power of a Lease/Purchase contract can quickly and easily land you a home that you could only dream of buying the conventional way.
Here are some features and benefits for the tenant/buyer:
* Faster equity growth: Equity accumulates much faster (five times or more!) than with conventional financing through a bank or lender.
* Rent money is working towards purchase: Every month a portion of your rental payment (typically $100-$500) is credited towards your down payment or off of the sales price.
* Option money is credited towards purchase: When you sign a Lease 2 Purchase contract, you will pay the seller an option deposit. This money is your vested interest in the home and will be fully (100%) credited to you when you buy the home.
* Minimum cash out of pocket: When you purchase a home the conventional way, you must pay at least 5% down plus closing costs and prepaid fees. When you buy with a Lease 2 Purchase, you only pay first month's rent, and a deposit with option. This will save you between 25% and 85% when you buy a home.
* Frequently no down payment at close: Since you have given the seller an option deposit and you have been receiving monthly rent credits, there will frequently be very little or nothing left to pay for a down payment at closing.
* Profits from appreciation: Since the sales price is locked in before closing (as specified in your agreement), any increase in property value will mean that your equity (what you owe minus what it's worth) is increasing in the home.
* Possible sale for a profit: If you are allowed to sell (assign) your option (it will be in your agreement), you may sell it to a third party for a profit.
* Increased buying power: When you buy a Lease 2 Purchase home, you can put down as little as first month's rent and a option deposit. Compare that to a typical bank or lender who requires 5-30% down plus closing costs and prepaids.
* Credit problems okay: Qualification restrictions simply do not exist. You will be approved at the sole discretion of the landlord/seller.
* No lengthy escrows or mortgage approvals: Your approval will be based solely at the discretion of the landlord/seller instead of a lender who can take up to a month (or longer) to render a decision.
* Control of the home: You will be put in full legal control of the home for a specified period of time without actually having to own it.
* No taxes, less liability: Since you do not own the home (yet), you will not have to pay property taxes and your liability exposure will be dramatically reduced.
* Quick move in time: You can typically take possession of the home in a week or less, instead of conventional move in times of one to three months, after your offer was accepted.
* Maximum leverage: You are spending very little (or zero) money to control a potentially very expensive, and very profitable, piece of real estate.
* Time: Before you actually buy the home, you will have 3-36 months (depending on your agreement) to repair your credit, find the best interest rates, investigate the home and research the neighborhood and/or schools.
* Privacy: Your name will not be on the deed or in the public records until you exercise your option to buy.
* Peace of mind: You will have full control of the home and can maintain or improve it however you wish.
If you are in the market to buy a home, you are probably aware of the advantages home ownership provides (tax shelter, appreciation, security, etc). If you are actively seeking homes for sale on a Lease/Purchase agreement, you are either (1) a very smart renter, (2) a very smart real estate investor, (3) not ready to make a commitment, (4) cannot yet purchase a home through conventional means or (5) any combination of the aforementioned.
The Lease/Purchase contract provides you with many features and benefits, but perhaps the most powerful one is the rate at which you accumulate equity. Compare any lender's loan amortization schedule to that of a Lease/Purchase contract and you'll quickly see that the Lease/Purchase contract wins hands-down -- every time. Moreover, the buying power of a Lease/Purchase contract can quickly and easily land you a home that you could only dream of buying the conventional way.
Here are some features and benefits for the tenant/buyer:
* Faster equity growth: Equity accumulates much faster (five times or more!) than with conventional financing through a bank or lender.
* Rent money is working towards purchase: Every month a portion of your rental payment (typically $100-$500) is credited towards your down payment or off of the sales price.
* Option money is credited towards purchase: When you sign a Lease 2 Purchase contract, you will pay the seller an option deposit. This money is your vested interest in the home and will be fully (100%) credited to you when you buy the home.
* Minimum cash out of pocket: When you purchase a home the conventional way, you must pay at least 5% down plus closing costs and prepaid fees. When you buy with a Lease 2 Purchase, you only pay first month's rent, and a deposit with option. This will save you between 25% and 85% when you buy a home.
* Frequently no down payment at close: Since you have given the seller an option deposit and you have been receiving monthly rent credits, there will frequently be very little or nothing left to pay for a down payment at closing.
* Profits from appreciation: Since the sales price is locked in before closing (as specified in your agreement), any increase in property value will mean that your equity (what you owe minus what it's worth) is increasing in the home.
* Possible sale for a profit: If you are allowed to sell (assign) your option (it will be in your agreement), you may sell it to a third party for a profit.
* Increased buying power: When you buy a Lease 2 Purchase home, you can put down as little as first month's rent and a option deposit. Compare that to a typical bank or lender who requires 5-30% down plus closing costs and prepaids.
* Credit problems okay: Qualification restrictions simply do not exist. You will be approved at the sole discretion of the landlord/seller.
* No lengthy escrows or mortgage approvals: Your approval will be based solely at the discretion of the landlord/seller instead of a lender who can take up to a month (or longer) to render a decision.
* Control of the home: You will be put in full legal control of the home for a specified period of time without actually having to own it.
* No taxes, less liability: Since you do not own the home (yet), you will not have to pay property taxes and your liability exposure will be dramatically reduced.
* Quick move in time: You can typically take possession of the home in a week or less, instead of conventional move in times of one to three months, after your offer was accepted.
* Maximum leverage: You are spending very little (or zero) money to control a potentially very expensive, and very profitable, piece of real estate.
* Time: Before you actually buy the home, you will have 3-36 months (depending on your agreement) to repair your credit, find the best interest rates, investigate the home and research the neighborhood and/or schools.
* Privacy: Your name will not be on the deed or in the public records until you exercise your option to buy.
* Peace of mind: You will have full control of the home and can maintain or improve it however you wish.
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