Lease options offer purchasers the ability to purchase a property by renting it for a short period of time and then buy the property a few years down the line. The legal paperwork is drawn up in a way that the tenant rents a property from the seller, pays rent and then at the end of the option term the tenant buys the property. The tenants are commonly referred as tenant buyers.
The tenant buyer pays an "option fee" which is a payment that allows him the privilege of buying the property at a later date. The option fee is credited towards the purchase when the buyer exercises his option. Option fee's are generally non-refundable payments so if the tenant buyer does not buy the property the seller would keep the option fee and replace the tenant buyer with another buyer.
Investors and buyers alike find it advantageous to use lease options as it provides them with the opportunity to buy a property even if they do not have substantial deposit monies, suffer from bad credit or have not been in the country long enough. The time between taking the property on as a tenant buyer and completing on the purchase after a period of time allows them enough time to either save up for a deposit, repair their credit rating and buy the property the conventional way - with a mortgage. Once the tenant buyer has exercised his option the seller receives his funds.
Below are the main features of a lease option:
•Buyers pay the seller an option fee payment. The option fee can be as little as one pound or one dollar.
•Lease option periods are typically anywhere from three years to five years in a slow market and one year to three years in a rising market.
•Buyer generally pays higher than market rent and the difference is credited towards the purchase by means of a deposit.
•Purchase price is fixed at the start and cannot change during the option period.
•The tenant buyer has the ability not to buy the property at the end of the term however in this case the seller would keep the option fee paid by the buyer at the start of the agreement.
•Only the tenant buyer has the right to purchase the property. The seller cannot sell to anybody else.
•The option can be exercised by the tenant buyer at any time
•Once the option has been exercised the option fee and any rent credits will be credited towards the purchase.
Lease options are generally put together by investors that by a property for a price slightly above market value and then sell it to a tenant buyer for a slightly higher price with a shorter option term.
Lease option homes will tend to be targeted towards individuals that have issues preventing them from getting a conventional mortgage.
Amandeep Sandhu is a UK (London based) property investor specialising in acquiring property using no money down strategies. Amandeep has written a home study programme titled "Secrets of Investing in Property without Money, Mortgages and Risk". To find out how you can learn the secrets of investing in property without money, mortgages and risk, visit http://www.leaseoptionprofits.co.uk
Article Source: http://EzineArticles.com/?expert=Aman_Sandhu
