How Does Lease Purchase Work?

Posted on January 12, 2017 By

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You have heard of lease purchase and lease option. Many people call thisĀ “rent to own” when talking about lease purchase opportunities.

How does lease purchase work?

Lease Purchase / Lease Option / Rent to Own Basics





Rent to Own is basically renting and then buying the house you are renting after a period of time. The details of how the lease agreement and purchase contract are written and structured can include a number of variables.

Lease Purchase Agreement

A lease purchase agreement will include a rental agreement with an agreement to purchase at a later date. Many agents I have talked to consider that a lease purchase agreement implies a stronger commitment to purchase than a lease option. However, clauses in the purchase agreement can be included to give the tenant buyer an opportunity to back out of the purchase.

Lease Option Agreement

The lease option agreement gives the tenant buyer the option of buying a rent to own home after a certain period of time. The purchase agreement allows the buyer to exercise the option to purchase the home under the agreed upon terms. The buyer does not have to exercise the option to buy.

Down Payment / Option Consideration





The landlord seller of a rent to own home will expect a down payment from the tenant buyer in order to enter into the purchase agreement. Some landlords will want a non-refundable option consideration paid with the lease that will be applied toward the purchase price of the house. However, if the option to purchase is not exercised, the buyer loses the non-refundable option consideration.

Rental Agreement and Purchase Contract

Rent to Own can have one agreement contract. However, many real estate agents believeĀ that it is best to structure the lease purchase or lease option using two separate agreements:

Rental Contract / Lease Agreement

This is the lease with all the normal provisions of a rental agreement. The lease should include a sentence acknowledging the existence of the purchase contract.

Purchase and Sales Agreement Contract

This is the purchase agreement and is totally separate from the lease. The purchase agreement will include all the provisions necessary in a typical purchase agreement and should include a sentence acknowledging the existence of the rental agreement.

Benefits of Rent to Own





Both landlord sellers and tenant buyers may benefit by a lease purchase agreement.

Tenant Buyer Lease Purchase Benefits

A lease purchase agreement has several benefits for a tenant. Many tenants enjoy the opportunity to enter into a rental agreement with motivation to become home owners.

Buyers who do not yet qualify for a home mortgage loan can rent the home they want to buy while they work at repairing their credit and increasing their income in order to qualify for a home loan after a year or two.

The tenant buyer also is comforted by the security of living in their house long term without having to move at the end of the rental agreement.

Landlord Seller Lease Purchase Benefits

Sellers benefit several ways by a lease purchase agreement. One good reason many sellers enter into a lease purchase with a tenant is to secure a purchase agreement for sale at a later date if they do not think they can sell fast today.

Sellers would rather someone living in their home paying monthly rent and maintaining the property rather than having the home sit vacant waiting for a buyer in a slow sales market.

The seller may fetch a higher purchase price with a lease purchase. The purchase price can be agreed upon by speculating that the value of the house will rise in a year or two. So a tenant buyer may be willing to offer a higher purchase price than a regular buyer will offer today.

Rent to Own Homes in Cherokee County Georgia

There are always homes available for lease purchase in Cherokee County and nearby areas in just about every price range. Tenants, home ownership may be within your reach now. Sellers, selling your home with a lease purchase agreement may be a good option for selling your house. If you want to rent a home in North Metro Atlanta and with plans to buy a house later, you may want to consider a lease purchase.

Coming Soon: Answer 4 simple questions to find out if Rent to Own is right for you!

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