Lease Purchase

Most tenants would rather be owners and many landlords would rather be retired! Sounds like a marriage made in heaven. Only one thing is preventing this union in the majrity of cases….CA$H.

The MMI Lease-Purchase Program marries owners who want to liquidate, but aren’t in a hurry, with tenants who want to buy, but are short of cash. The tenants, of course, must have the income needed to qualify.

In short, we calculate the cash needed for the purchase based on an agreed upon price and terms. The tenant is expected to make a substantial deposit with the contract. Then, we subtract the deposit from the cash needed to determine how much must be saved over the duration of the Lease-Purchase Agreement. We divide that amount by the number of months and add it to the rent. The extra “rent” is considered “additional deposit” under the contract.


Cash Needed: $15,000
Initial Deposit $5,000
Additional Needed $9,000
div by #months /18
Monthly Deposit $500
Rent Charged $1,200
Additional Deposit $500
Tenant Monthly Payment $1,700

Now we’ve resolved the cash problem. The tenant has paid an initial deposit and will pay monthly deposits in addition to the rent which will, at the end of the period (in this example, 18 months), accumulate to the cash needed for settlement.

To secure the transaction, we prepare both a sales contract and a lease agreement. Each document stands alone to provide all the terms and conditions, requirements and penalties for its own transaction. There is a tenancy created, which requires payment of rent and certain maintenance responsibilities be borne by the tenant, and there is a sales agreement in place, which is expected to conclude. This is the primary difference between the MMI Lease-Purchase Program and a Rent with Option. Under a Rent with Option, there is no requirement to settle on the part of the purchaser. Then, we tie both of the agreements together with a Lease-Purchase Agreement to specify the effect on one agreement if the other is violated.

This program creates a tenancy with an incentive and a vested interest. Provided the transaction is structured in a manner as to allow the tenant to comfortably believe that he/she will become the owner, there is a tendency to treat the property with more care because it will truly be theirs on a predetermined date. There’s no better tenancy.

The example above is an 18-month Lease-Purchase — we’ve done shorter and we’ve done longer. In part, the duration is determined by both the initial cash available and the ability of the tenant to pay the monthly deposit. But, the owner can offer incentives to shorten the duration. For example, an owner may say, “apply your anticipated $1,500 tax return to your deposit to shorten the period by 3 months and I’ll apply $125 of each of your monthly rental payments to shorten it by another 3 months, you’ll own it in 12 months!”.

We’ll follow up every step of the way… We’ll collect the rent, collect and deposit the monthly deposits, assist the purchaser to obtain financing and help setup settlement. The MMI Lease-Purchase Program is a great way for landlords to get out of the rental business and for tenants to become owners.