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Lease to Own vs. Buying a Duplex

We are interested in purchasing the duplex we live in and have "Good-Excellent" credit. We have a great relationship with the owners and they have expressed interest in us purchasing the home. They don't want to sell the home for 3 years but have presented a lease to own option that would involve us leasing the entire property and subletting the other side. We would pay a monthly amount based on a 20 year mortgage at 4.75% with a 3% down payment and be responsible for maintenance costs up to a negotiated amount (i.e. $1500). This would allow us to purchase the home at a fixed amount in 3 years. We would consider buying another duplex but most financing options require 20% down payment or FHA (up to $250/mo PMI) and we feel comfortable putting down up to 5%. We are having a hard to deciding whether to move forward with the lease to own and take on the responsibilities of a homeowner without the immediate benefits or continue looking for a single family home at a lower price point to take advantage of low interest rates and homeowner tax benefits.
  • October 07 2013 - US
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Answers (4)

Profile picture for CallTheSisters
Lease to own is a scary proposition.  Not wanting to complete a sale for 3 years raises a red flag to me.

You have good credit try to find something you can buy without lease to own.

If you decide you want to go the lease route without a doubt hire an attorney to review any agreements, have a property inspection done, and an appraisal to determine fair market value at this moment in time.
  • October 08 2013
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I agree with The Sisters.   The market is good to find an alternate property with rates so low. A lot can happen in three years.    If you do decide to do the duplex Lease to Own, put everything in writing now, including terms, rate etc. and have an attorney review and discuss how title will be conveyed and what will be recorded and when.  
  • October 08 2013
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Profile picture for Scudo Realty
As mentioned, lease to own deals are risky, and in my experience, rarely end up working out well for everyone. Consulting an attorney, and weighing the consequences vs benefits is a great place to start!
  • October 14 2013
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First, Lease-to-Own situations, as mentioned by others here, rarely work out.  I would recommend getting the FHA loan and pay the PMI for a few years, then refinance later.  If you do decide to go with the lease-to-own situation, then I strongly suggest that you use a third party collection service to collect the payments from you and pay the seller.  These companies are inexpensive and can make sure that the present owner stays current on their loan (if they have one).  They also calculate the interest you are paying and send you a W9 at the end of the year for your taxes.  Additionally, many of them report to credit agencies.  The headaches that can arise from owner financing are numerous and these companies can prevent inaccuracies, bad memories and hard feelings.
  • October 14 2013
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