RENTAL PROPERTY
NEWSLETTER - BLOG

By: Donald J. Leske II
Property Manager / Editor
BCI Properties, LLC


 Glossary of terms



Call Ben Leske - Loan Officer
(253) 202-3355


 

 


 

 
 

 Home | Sales | Property Management | Rental  Listings | Rent-to-Own | FAQ | About us | Rental Newsletter | Contact


 
Donald J. Leske Sr. - Manager/Broker

Emily Leske - Accounts Manager
P.O. Box 44065, Tacoma, WA 98448
 
Office: (253) 324-9699
Cell: (253) 241-6695 


RENT/LEASE to OWN PROPERTIES
RENTER/TENANT Information

Renters,

Basically, most people would rather own a home than rent one.., but most simply cannot come up with the needed credit scores and/or down payment needed. We will discuss the most common two programs that we offer daily.

Disclosure: Please be aware that the Home Owners are our clients and we at BCI Properties, LLC have a fiduciary obligation to look out for their best interests. We will always be honest in all our dealings, however you have no representation legally by us. You should have all legal, lease, rental, purchase and sale agreements etc reviewed by an Attorney. We can recommend several in the area if you wish.

What is Leasing or Renting a home with Option to buy?

A Lease or rent to own home is where you lease a home, but you also control the property by having the option to purchase it at any time during your lease period. The owner nor their Agent can not market the home for sale, since he or she is bound by their agreement to sell the home to you at a pre-determined price that you agree on before you move in. Always make sure that the Property Manager or Seller/owner files your option to buy agreement with the county recorders office that the home is in. This will protect you further in most cases.

Two Optional Rent-to-Own Plans

A. Rent to Own Basic Option - A simple rental agreement with a basic statement in it or attached as an Addendum, which allows you the "right of first refusal" or "option to buy" the home for a pre-set amount of time and on some rentals we can negotiate for a pre-set price. Options are set for the term of the lease or one year. No extra money down by the renter, just pay normal rent. You must come up with what ever is required by your lender for a down payment and closing costs in the end of course. Ben Leske at City Bank can help with this process and advice in terms of what to do next. See logo and phone number to the left.

B. Full Rent with Option to Buy Plan -

There is two parts to such an agreement: the first is a standard lease that spells out the monthly rent, and other standard lease terms. The second part is a Real Estate Purchase Option. This is a one way agreement that binds the Seller to sell to you at an agreed upon price. The Seller/owner has to sell your home to you when you want to buy it (during the option term), but you don't have to buy if you don't want to. That is why it is a one way agreement.

The lease option has a fixed period after which it expires. The term is typically one to two years and is negotiated between you and the Property Manager on behalf of the Seller/owner. To secure the option, a down payment is necessary. This is known as "Option Consideration". This consideration is compensation to the owner for taking the property off the market and to guarantee a future price to you. The Lease to own option consideration will be applied as a reduction to the purchase price at the time you decide to buy. It can also be counted as a down payment instead in order to help you qualify for a loan. Your Property Manager BCI Properties, LLC can help you with finding a suitable home loan lender.

If you decide not to purchase the property, the option consideration is not refunded. It is kept as compensation by the owner for guaranteeing the price to you for a fixed period of time. Your intent should therefore always be to buy the home once you enter into a rent to own agreement. The option consideration is typically 3% to 10% of the agreed upon purchase price and is negotiated up front.

You should always ask for a rent credit. This is beneficial for both the Seller and the Tenant/Buyer. You agree to pay slightly higher than market rent, in exchange for receiving a percentage credit to the purchase price for every rent payment made on time. Eg. Let's say market rent for a specific home is $1,200. You agree to pay $1,400 a month in rent, but in return you receive a $400 a month rent credit if you paid on time. If you leased for one year, you would have accumulated $400x12 = $4,800 in rent credits, which will reduce your purchase price even further. In other words, a portion of your rent is saved towards the purchase of your instead of losing the entire amount to the landlord. However this may not be part of every lease and you must ask for this concession, the owner may or may not agree to that provision.

 
1. An option fee, which is generally 3-10% of the home purchase price, is negotiable and is paid to secure the Option To Purchase Agreement. 100% of the option fee is applied toward the purchase price as a credit when you purchase the home at the end of the lease term.  In addition, any amounts you elect to pay in excess of the base monthly lease/rent are also applied 100% toward the purchase price.  This enables you to build equity ownership in your home.

Requirements include:
Along with a Lease/rental contract we will need a written sales agreement to be executed and fulfilled within 12 months, but you may negotiate in many cases for up to 36 months on a Lease/Rent to Purchase Contract... and you may be able to "Lock in" the price while the original owner will remain on the deed until you have taken your option to buy, as you are still renting or Leasing and only have an "Option" to buy. You need to have:

 1. A qualified job, meaning that you have been on a job at least a year and its full time or that your co-buyer or spouse also qualifies.
 2. No evictions on your records.
 3. Enough cash to pay 1st + Last months rent + deposit. Depending on the plan chosen,  deposits vary.
 4. Willing to pay a $35 basic or $75 full, credit check fee.

On the good side:
A.
If you are happy with your home, you can buy it at yesterdays prices because our BCI PROPERTIES contract protected you by "Locking in" the original sale price when we first negotiated the Lease/Purchase contract. You paid for that privilege with your non-refundable deposit.

B. You may take your option at that time and finalize the purchase of your new home. BCI Properties, LLC can assist you with finding a lender with suitable rates to make it a smooth process. You should have all legal contracts reviewed by a competent Real Estate Attorney.

C. If you have a non-refundable deposit, it can be used as part of your down payment. Financing a home can be tough these days and money is tight, even good credit scores may not help when your lender requires a down payment that you may not have, so you can Lease-to-Own with a non-refundable deposit or you can negotiate to have a part of your monthly rent applied or credited toward your down payment. When you exercise your option to purchase however after a  year or two, your lender may tell you that your loan could possibly be treated as a refinance using the appraised value of the home. Ask your lender today.

On the bad side. What can go wrong?
A.
You may not be able to get your credit score to come up within 12 months and the owner may not want to re-negotiate your Lease/Contract or may want a lot more for the rent/lease. Ask us to write into the lease contract an automatic 2nd year lease/rent if needed with no more than a 8% raise in rent... as an example. This is not in the normal lease and it will not be available to you if you do not ask for it. Some owners may refuse up front but many more will cooperate.

B. You may not like the current finance rates or plans offered to you when you are finally ready to buy and exercise your option to purchase. Do not allow your Lease contract to expire before you decide what to do.

C. You may have poor credit, no money down... and/or no job. There is not much we can do for someone who has all three strikes against him/her except to encourage you to save your money, improve your credit score by paying your bills... and/or get a job. If its just poor credit but you can come up with the money to put down, we may be able to help. If you have good credit but just no money down.., we can probably help. If you have no job or source of regular documented income... well, not much we can do about that.

D. If you paid extra money down or a non-refundable deposit and allow your rental lease to expire before you execute a Purchase and Sale Agreement you can and probably will loose that money.

Call today for more info. More details will be listed here later.

Ask for:

  • Donald J. Leske Sr. / Manager
    Emily Leske / Rental Coordinator
    BCI PROPERTIES, LLC
    P.O. Box 44065
    Tacoma, WA 98448

    Office: (253) 324-9699
    Cell: (253) 241-6695 
    Contact us


Note: If you have added questions or experience problems with our system
please feel free to email us via our Contact Form.

DISCLAIMER NOTICE:
* Prices, options, offerings and any other item listed within this site is not the responsibility of Homes-and-Properties,
homesandproperties, bciwire.com nor its owners unless it is our specific listing and contracted as such. You are encouraged
to have a professional Real Estate agent assist you in either buying or selling any home or real property. Donald J. Leske II is a
licensed Real Estate professional serving all of Pierce County and South King County, plus selected listings will be considered
State wide.

© 2003.2008 Homes-and-Properties.com All rights reserved.
Website design & hosting by:
BCIwire.com