How Lease Purchase Options Can Benefit You

Lease purchase options became more widely used during the 1970s and 1980s.

Property ownership has become the pinnacle of real estate investment. As a result, business owners are seeking ways to purchase properties. One of the

solutions is a lease purchase option. Lease purchase options allow business owners an opportunity to buy the property at some point in the future. This combines the security of a long-term lease with the ability to build equity through property ownership if the business warrants this type of infrastructure investment.

Lease purchase options became more widelyused during the 1970s and 1980s.That was thetime when high interest rates and theimpending savings and loan crisis of the 1980scaused real estate activity to plummet. Thesefactors combined to create real estate marketconditions similar to those we are seeing now inthe wake of the mortgage crisis and the financialmeltdown.

In order to attract buyers, sellers fine-tuned inducements such as leases. The sellers allowed leases to contain built-in options that allowed the tenant the right to purchase the property at a later date. Lease purchase options have continued to evolve since the 1970s, but the basic elements have essentially remained the same.

A lease purchase option gives a business owner theright to buy the property within a specified timeframe for a pre-determined price. Lease purchaseoptions were designed as an incentive to buyers.They allow buyers to find and secure a propertylocation and move forward with a purchase whenthey are ready to do so. The option allows a buyerto lease the premises for a set period of time, withthe option to purchase. The option allows apurchase to be made at any point during the optionperiod. This varies based on how the option isworded.

The buyer pays for the privilege of having such anoption. The payment is similar to a deposit paymentmade with a traditional purchase agreement,although it is typically a nonrefundable deposit. Thebuyer and seller can set a purchase price at theacceptance of the option or assign a value to the saleat the completion date of the option.

Most buyers want to lock in the purchase price at the beginning of the option period. Sellers need to be aware that during the option period they are basically giving up the right to sell the property to another party.

Lease purchase options typically cover a 12-to-36-month period, which means sellers run the risk of forgoing any natural price appreciation

that can occur during the option period. With fragile economic stability and unstable real estate markets across the country, lease purchase options offer sellers another way to attract reluctant buyers.

Investors can seek profitable lease returns whilewaiting for the sale to finalize during the leaseperiod. This offers a win-win scenario for bothbuyers and sellers.

Randy Bettwww.BetterGroupRealEstate.ca