How to Succeed at Real Estate Subleasing and Lease-Purchase

Installment #13

Our last installment covered various techniques and methods of financing the purchase of property. This installment is going to cover a lot of information pertaining to this option such as the benefits, how to use with a sublease, as well as some of the items that need to be included in the contract for a lease purchase.

Remember a lease purchase is the purchase of property where you rent property through a lease, which includes a guaranteed option to buy at the end of a set period of time. Typically, a portion of your rent payments will be credited towards the down payment, so that if you decide to purchase the house, you have already paid the majority if not all of the down payment.

While it may seem as though only the buyer is benefited by this type of transaction that is false. For a buyer there are fewer benefits than for a seller. However, the benefits for the buyer are usually greater financially. Benefits to the buyer include low risk with high financial leverage, if the buyer changes their mind about the purchase they are free to walk away, the seller is required to sell the property to the buyer, the buy is given control and possession of the property when the agreement is entered, there is typically very few initial expenses and costs with securing property this way.

Benefits to the seller include, most buyers in this type of agreement are willing to pay more for the property, therefore increasing the profit they make from the sell. The money that is received is tax-deferred until the option is exercised or it expires. If the rent is not paid on time the purchase option expires immediately, as well as the seller received the equity buildup over the option period. The tenant is more likely to take care of the property since they have a feeling of ownership, as well as the seller has the ability to regain possession if the buyer defaults in the lease purchase agreement.