A “Lease-Option” is when, in addition to signing a lease, a tenant also buys an option to purchase the house at some point in the future, usually during the life of the lease.  

Example:  Harry Homeowner leases a house to Tammy Tenant for one year.  Tammy also purchases an “option” to buy the house within the next year at a price to be determined by a neutral appraiser if and when Tammy exercises her option.  This Option gives Tammy the right, but not the obligation, to purchase the house. 

If Tammy does exercise her Option, the amount she originally paid for the Option will typically be applied to the purchase price of the house.  Also, assuming it is paid on time, a portion of her monthly rent will usually be applied to the eventual purchase price as well.  Finally, Harry may also agree to give Tammy a split of the equity that grows through normal appreciation between the time Tammy signs the lease and when she exercises her Option.

Lease-Options are most popular with people who don't have enough funds for a down payment and closing costs and/or people with low credit scores.  Instead of simply paying rent that is never recovered, tenants are able to share in the equity that is generated exercising their Option and purchasing the house below market value (appraised value minus Option purchase price, monthly rental credits, and/or equity split). 

Example 1: Equity Chart Comparison

A comparison of the rate of equity accumulation in a one-year period based on the following example; 3 Bedroom, 2 Bath home with a sale price of $100,000.

Note: Utilizing the CRESAZ Lease-Option Program with the same monthly payment as renting or owning, you have effectively doubled the amount of equity earned as compared to owning, with roughly half as much money out of pocket up front.

 Lease-Option: If you Lease-Option this home, assume you will put down a $3500 option deposit (credited 100% towards the purchase price of the home) plus first months rent of $1000. You will also receive a $125 (12.5%) rent credit each month that will be credited towards the purchase price of the home.

 Rent: If you were to rent this same home for $1000 per month, you would have to pay first and last month's rent plus, approximately, a $1000 security deposit (total up front out of pocket: $3000).

 Purchase: Assume that you have very good credit so you are able to secure an 8% interest rate on a 30-year mortgage and a SMALL down payment of 5% of the sale price ($5000 down). Your mortgage payment would be approximately $735/month. Taxes, insurance and private mortgage insurance will run approximately $265 per month. This would put your monthly payment at about $1000/month. Closing costs and pre-paid expenses typically cost about $3000 for a $100,000 home.

As you can see, using a Lease-Option instead of just renting creates a ‘win-win’ situation for everyone!

Benefits of the Lease Option Program