Lease to own, Lease with option to buy, What ever you like to call it this may be a good option for you. Lending guidelines have been getting stricter over the past few years following the mortgage lead downturn. Some of you have just graduated from school and beginning to reap the financial rewards with your new degree but are new at your job and lenders are hesitant to lend to you. Some of you are working on your credit in order to qualify for a better rate and terms or to qualify at all. You really would like to buy a home you can call your own but you are not quite there yet. Leasing a home with a lease to buy option may be your best bet but there are some issues you should be aware of. As a South Orange County Realtor with some of my business being rental properties I cannot count how many times I have been asked HOW DOSE A LEASE WITH OPTION TO BUY WORK? HOW DOSE A LEASE TO OWN WORK? Well it all sounds like a great idea until I let them know that it is not free there is a little gambling involved and the rental money dose not go towards the home purchase, At least not in a standard lease with option contract. Basically what you are doing is buying the option to buy in the future at a price agreed on today. Putting option money on the table is a way to get the seller interested into this kind of contract. Donald Trump used this strategy on his way to success and I would like to use him as an example. Donald would always be on the lookout for a way to make a big quick buck with Real Estate. If Donald came across a piece land or run down development in a good area that he believed would have good future potential he would approach the owner with option money. He would say to the owner of the real property if I give you X amount of dollars would you consider giving me an option to buy this land between now and 24 months at a purchase price of X amount. Of course the owner of the property did not know what Donald’s plans were and did not see the large potential . Once the Donald and the owner agreed on the purchase price, option money amount and the term of the contract in this example 24 months the contract was drawn and the option money was paid to the owner and Donald had a binding contract he was in control of. Now Donald started putting his plan together. He would visit Engineers, Lenders, and Investor’s with his plans for the land usually to build a high-rise apartment complex, Strip mall or other kind of Development that would pay off well when complete. If Donald was able to put together his plan and get the financing etc he would go ahead and activate his option with the land owner that must sell at the agreed price and start construction. The initial option money would go towards the down payment. If he was unable to get approvals and financing etc within the 24 months he would walk away leaving the little option money on the table for the owner. On a smaller scale buying a house with a lease to buy option is very similar. If you guess correctly that the home will be worth more than the current value in 24 months time you will have instant equity when you purchase it. If the expiration of the term comes and the home is worth less if you chose to walk you will lose the option money. Before you walk I would recommend you renegotiate the price with the owner because the owner will need to market the home at current values to sell it anyway. This works in the buyer’s advantage but like most investments comes a little risk.

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