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Updated over 2 years ago on . Most recent reply

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Jon Davidshofer
  • Davenport, IA
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How to structure lease to own agreement

Jon Davidshofer
  • Davenport, IA
Posted

What is an appropriate lease to own structure regarding how much should be applied to principal balance? If our client only has 10% down, the bank requires 20%, and their monthly payment is $15,000, what amount of that should go towards reducing the sale price? $1,000? $2,000? Should the calculation also be based on Time Value of Money? 

If anyone has a way to calculate this, then I would greatly appreciate the suggestion.

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Joe Villeneuve
#5 All Forums Contributor
  • Plymouth, MI
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Joe Villeneuve
#5 All Forums Contributor
  • Plymouth, MI
Replied

None.  They are to separate contracts:

1 - Lease
2 - Option to buy

When the option contract is executed, then the third contract is made:

3 - Purchase agreement

If you do it the old way where you give credits for rent, option consideration, etc..., then you're asking for trouble.  Keep the contracts completely separate...and make no mention in either contract of the other contract.

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