Opinions, please help! Lease to Own info

[Adriana Sirignano]

Hello Everyone, 

I've NEVER done a Lease to Own option. Is this safe and is it worth it? I reached out to a Seller and asked if they would consider a Sellers Financing. They said no, because they have an existing mortgage, but they said they are open to a Lease to Own. Can I do this and rent out each room for a house hack to help pay off the Loan? Who here has done this and what was your experience with it? Is it worth it? The area is EXACTLY where I want to live at, but I just don't qualify through a regular bank because they say I don't make enough to suppose it. Which isn't true, I'm debt-free, great credit (800+) but the banks are going off a property that I gave to my daughter with my name still attached to the mortgage, which she pays since adding her to the deed. For some added info, the selling price is: $600,000... The sellers just bought this property last year for $575,000, not a flip, they just bit more than what they could chew and need to sell it. Any help and advice would be welcomed. What is a fair or reasonable down payment fee, terms etc and what do you think I can charge per room in a HOT market area close to Boston. Thank you all.

[Bo Smith]

Adriana, lease-to-own is absolutely doable at 00k, but you need to understand what you're really doing here. This isn't a lease-to-own in the traditional sense where you're buying down the road. You're essentially buying the house right now under a different legal structure because the seller can't sell it directly (due to their mortgage). The seller gets their cash flow, you get the benefit of building equity month-to-month.

Fair structure: put down 10-15% as your non-refundable option fee (that's 0k-90k on a 00k deal). Then negotiate a rent credit of 20-25% of monthly rent that goes toward purchase price when you do a traditional mortgage. Option period is typically 3-5 years, which gives you time to clean up that mortgage on your credit and get the bank to ignore it (they might after 2-3 years). Monthly payment to the seller should reflect current market rate MINUS the rent credit, so it's not punishing to you. The seller wants to avoid foreclosure, so they'll negotiate.

House hacking it is smart because it reduces your carrying cost. In a hot Boston-area market, you're probably looking at ,200-1,500 per room if you have 3-4 bedrooms. That could actually cover most of your payment to the seller, which is the whole point.

The risk: you're still not the owner yet, so you can't refinance until the bank approves you. Get pre-approval from a lender NOW who understands lease-to-own situations. Some won't touch them. Also, negotiate a clause that says if the seller gets foreclosed, you have the right to take over payments and the sale price is locked in. This is critical.

How much are you thinking as a monthly payment to the seller, and have you gotten pre-approval from a lender yet?