I’m considering entering into a lease-purchase arrangement with a woman who is interested in a building that I own, and I’m trying to get a handle on what the pros and cons of such a deal would be.
Do any of you Dopers have experience with this kind of contract, and what are your opinions?
My wife and I currently own a few houses that we are doing lease purchase options on with the tenants. My experiences are certainly colored by the difference between residential vs. business uses, but we’re not real happy with the results right now. Most of the people don’t pay on time. One issue that might be similar in both situations is maintenance. Make sure it is spelled out who is responsible for repairs. Also, a few of our tenants were under the impression that they would get the tax benefits of home ownership, but they don’t. That probably won’t be an issue for you, but just make sure. Last issue I would think about is the term for the lease option. I wouldn’t go longer than 5 years, and would prefer 3. By then the person should be able to get permenant financing. We currently hold 2 second mortgages in addition to the above properties and I won’t EVER do one of those again. When the person get’s financing make sure they get 100% of it. Back to the lease term, I would build in rate increases each year because your taxes are going to go up and your insurance could also and you want to be able to pay for that.
I’m not trying to convince you not to do it, just think it all the way through and get a lawyer who has experience with this specific plan.