Residential Lease-Purchase Agreement: Fill & Download for Free

U.S. perspectiveI recall learning, in law school, that one can record anything that pertains to a parcel of real property. Accordingly, I am confident that you could record a lease at the county recorder's office, just as you could record - as you noted - documents pertaining to purchase and sale of the property.What I can't figure out, however, is why you want to do this. It appears that all you might accomplish is to encumber the title to property that you own.Perhaps the most helpful answer is "Residential lease agreements normally are not filed with a governmental agency."

I’ll assume you’re talking about residential properties. In that case, it’s equally applicable to single-family homes, townhouses, and condos.First, though, there’s a difference in lease-purchases if you’re going to live there (presumably, then, the goal is not as an investment but rather as a residence) or if your primary strategy is as an investor. I’ll first describe the mechanics for someone who’s going to live there . . . then add on the additional information if you’re an investor.Note that there’s a difference between lease-options and lease-purchases. In a lease-option, you lease the property and you have the option (but not the obligation) to purchase the property. In a lease-purchase, you are leasing the property and have committed (often with a completed purchase agreement) to purchase the property. That’s a big difference.In a lease-option, there’s typically an up-front option fee. It’s not a down payment; the fee is paying for your right to buy the property. In a lease-purchase, there may be an up-front down payment on the purchase. All the elements are negotiable, but the option fee often is 2%-4% of the agreed-upon purchase price of the property. The down payment in a lease-purchase usually is higher, just as a regular down payment on a property would be.The option will specify how long it runs (2–5 years, typically) and the purchase price if the tenant-buyer exercises the option. The purchase agreement in a lease-purchase obviously includes the purchase price; it also specifies how long the agreement is good for—when the property must be purchased.The lease in the two cases are similar. It’s a lease that runs (usually) the same amount of time as the option or purchase agreement. In the case of a lease, though, it may be shorter; for example, you might have a 1-year lease renewable at the tenant’s option for—say—4 years in the case of a 4-year option. An investor will want the option to run longer than the lease.Often, in the case of a lease-option, a portion of the rent is credited to the purchase price or closing costs if the tenant-buyer exercises the option. It’s all negotiable, but a $1,500 a month lease might credit $150-$250 of that amount to the purchase price…again, if the tenant exercises the option.Usually, depending on how the documents are written, the tenant-buyer has the right to purchase at any point up until the expiration of the option or the purchase agreement.So that’s how a lease-option or lease-purchase works.But an investor really doesn’t want to rent and live in a property for several years until he/she buys it. So there are two basic ways an investor makes money on the transaction.Buy the Property and Offer It as a Lease-OptionIn this case, the investor actually buys the property up front. He/she usually does some rehab on it, then advertises for a tenant-buyer.Example: He buys the property for $100,000 and puts $15,000 into a rehab. The property is actually worth $140,000 on the open market—not really enough for the investor to “flip” the property. So he offers it as a lease-option. Maybe a $10,000 option fee, a purchase price of $160,000, a 3-year option, and a lease of $1,200 with $150 credited to the purchase price. All the numbers are a bit too complex to go into. But, in brief, the investor receives $10,000 up front, reducing his investment to $105,000. Very crudely, he’s getting $1,200 a month from his $105,000 investment, for a return of 14%. If the tenant-buyer exercises the option, the net to the investor will be $144,600 (subtracting the $10,000 option fee and the $5,400 in rent credits). The investor’s cost was $115,000, so the profit is $29,600. Not great, but maybe acceptable.Sandwich Lease-OptionIn this case, the investor lease-options the property from the owner. He then turns around and finds a tenant-buyer to lease-option it to. (The numbers will be similar, but the type of property might be different.)Example: The property is worth $140,000 on the open market. He lease-options it for $115,000 from the owner (whose main motivation is a steady rental income) and signs a lease to pay $800 a month. $150 is credited to the purchase price. He pays a $100 option fee. He finds a tenant buyer who will put up a $10,000 option fee, rent it for $1,200 a month, and agrees to a purchase price of $160,000. $150 a month is credited to the purchase price.The investor initially makes $9,900 on the option fee spread. He makes $400 a month on the rental spread. The rent credits are a wash. If the tenant-buyer buys, the investor exercises his option to buy, then sells or transfers the property to the tenant-buyer. The spread in the purchase prices ($160,000 minus $115,000 equals $45,000 minus the tenant’s $10,000 option fee) is $35,000. There are a lot more moving parts to a sandwich lease-option, but in this case the investor hasn’t had to purchase the property.The investor could have gone into the deal with the owner using a lease-purchase, though a lease-option would have been more desirable. Similarly, the investor could have signed a lease-purchase agreement with the tenant-buyer.So: That’s how lease-purchases and lease-options work with in real estate investing.

A residential lease agreement can be created online. Several things are included in a lease contract. The names and contact information of landlord and tenant, address and types of property being rented, lease start and end date, amount when rent is due, late fee, details of security and pet deposits etc. The rental lease agreement also contains the option to renew the lease or purchase a property. The residential lease agreement may also include the information about who will pay for the electric, water, gas, garbage, lawn care etc. It also contains the details of policies and permissions.