The mortgage crisis has set off an incredible chain of events. Lenders have tightened requirements, giving even the most creditworthy borrowers a hard time when it comes to qualifying for a new mortgage or refinancing an existing one. In this Climate, a sensible person could talk themselves out of buying, but history proves that over the long-term, home ownership is a smart way to invest your money. Many people who are struggling to get mortgages are turning to lease-options, where renters lease the property and have the option to buy the home. Typically, in return for the landlord/seller extending the offer to buy the property after a period of time (usually one to three years) at a predetermined price, the tenant/buyer has to pay an upfront option fee. That fee is generally non-refundable. A portion of the monthly rent may be applied toward the down payment to purchase the home, buth this can only be for payments in excess of fair market. Advantages for the buyer/tenant include:
- You can see if homeownership is right for you by testing it out.
- In an appreciating market, you may get a good deal if the home goes up in value and you have already locked in a price. (although the reverse is true if the value goes down.)
- Can help to rebuild credit
- Cash flow from the tenant and the opportunity to sell your property later.
- If the tenant/buyer doesn't buy your property, you keep the upfront fee.
- You may have a larger pool to market your home to because you are marketing to traditional buyers and also renters and investors.
- You will likely get higher-quality tenants who take better care of the home since the tenants may want to buy it in the future.
- Since you own the home, you retain tax-shelter benefits while you have tenants in the home.
