What is a LEASE Purchase Deal and How Does it Work?

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2 years ago
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Lease Purchase deals are part of the Terms niche in real estate and they give both sellers, buyers, and investors more flexibility over the transaction. There are plenty of ways to pivot and exit from Lease Purchase deals, but the default is through a sandwich lease that goes out on a rent-to-own agreement.

Watch this video to learn more about Lease Purchase deals, the strategies you can use, and how everyone involved can benefit from them!

Key Talking Points of the Episode

[00:00] Introduction
[00:35] What does Lease Purchase mean?
[01:15] How does the Lease Purchase system have low default rates?
[02:15] How flexible are Lease Purchase deals?

Quotables

“So the benefits of this term niche, number one, I just heard you say in recap, is you’re not signing any personal guarantees, you’re not signing for debt which obviously reduces your risk greatly.”

“In all states except for Texas right now, we refer to this as a sandwich lease, so we’re gonna tie the property up with the seller via a lease purchase. We’re then gonna file a notice of options so that we’re on the title and we’re protected, most importantly.”

“Our buyer program is extremely strenuous where we have about a 2-5%, COVID maybe pushed it up to 7% default rate.”

“My son, at this point, has a bunch of steps he brings them through to pre-qualify them and to make sure they’re truly buyers, not renters that have a dream to maybe someday own.”

“So we tie it up on a lease purchase and we exit on a rent-to-own.”

“We point them and suggest to them where they should go for financing, we don’t do it.”

“We make sure that part of their agreement is they fulfill their mortgage-ready steps, we call it. If they get off-track at any point, it defaults their purchase option.”

“If we end up turning our side of the deal into a longer deal, i.e change the deal into a Sub-to eventually, we will give the buyer a carrot and we’ll say if you get your deposit up to 20% over time and if you never miss a payment, you’ll never see a bank if you don’t want to. We’ll seller finance you.”

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