Thread: Help with Lease Purchase/ Lease Option for unexperienced college student

First off I would like to thank anyone that supplies any and all useful information. I am in need of it as of right now or at least recognize the fact that I am.

I am a 25 year old college student with, including this upcoming school year, 2 years left until I graduate with my bachelors degree. I recently went back and realized how important it is to society that I increase my debt now in order to decrease my debt in the future with a career. I am not licensed.

I am currently weighing my options in securing either a house or condo, for a minimum of 2 years from the end of this August. So August 2012.

I will try and provide you with as much information as possible as I am sure that will help in giving advice and answer any of my questions.

My current credit score is around 540's, because of a credit card, (with a high balance, almost 10k and no payment history for 60-90 days), I was put on that was never my responsibility and I never made purchases with it. A dispute was opened, I signed/ as well as the other party a paper stating that the bank will delete the account from my credit bureau report. Two individuals working at one of the banks I do business with believe it to be the only real issue on my report. We were going over the reason why it was so low.

Getting to the point as far as this part, anyone have an idea as to what my score could or will jump to by the start of August? I am really pressing this point because I want and will do everything in my power to maintain a high credit score.


I need to find and be in a place by August 20/21st. I know that my time is limited but it is for good reasons.


Here goes:


I plan on using a student loan, probably in the $9,500-10,500 to pay towards rent, utilities, insurance.
(This loan will be signed through me and co signed by another individual with good credit. He intends to pay half of this loan off to help me with off campus housing.) I intend to start making payments in November to drop the APR by .75% as well as continue to build credit.


A refund check through the school in the amount of 4,200 will be directly deposited in my account probably by the 3rd week in Sept. I will be getting another 4,2000 refund the 3rd week of February as well.


I also will have a work study program that I will be working that will bring in probably just a little over 130$ a week. In addition to my job that I can work as much or as little as necessary. Making a little more than 10$ an hour.


I recently rolled over my 401k and am doing some moderate investing, my goal is about 10,000 to 15,000 in the next 2 years. I am currently sitting at 3,4000. I might make additional deposits into my account yet rather not. I understand the difficulties with this and am educating and looking at other ways to maximize its growth. Yet want to take advantage of being able to use up to 10,000 of my 401k (I believe it has to be a Roth 401k?) because it would be tax free since I would be a first time homebuyer.

I am also looking at purchasing a 9 month and 12 month CD if possible to invest and gain interest.
To use later to make payments toward rent as well as utilities when they expire.


So my overall goal is this:


Drafting a lease option/ lease purchase with the help of a real estate lawyer or would it have to be a broker? I am trying to stay away from using a broker since I don't want to cut in a middle man. Paying a lawyer to help draft the option is ideal and necessary.


In the option or purchase I am looking for several things to be included.
Setting up specified amount in terms of non returned option.
Setting up defined value of house.
Paying in advanced at least 4-6 months advanced.
No smoking or pets are permitted within the residence.
Sublet rights to one other tenet, who signs and agrees to all contractual obligations I set forth.
The possibility after 1 year of renting to walk away or sign another Lease Option/ Lease Purchase.
That I am aware and notified of all visits of owner and anyone acting on behalf of the owner within 48 hours, between the times of 10am-7pm.
A limit of individuals within the house at a time or staying the night, say 10.
Addition of (said amount, 150-200) to monthly rent with the addition of a roommate.

As of right now its pretty basic but I am looking for advice in terms of things I should absolutely have in print that will protect me as well as the owner to make the deal more appealing.


I am looking for sublet rights for basically one reason, Cash Flow. I figure having a roommate will not only benefit both the owner as well as myself, yet they could ultimately be helping me pay some extra money in terms of rent credits toward the deposit or final price. How do rent credits work exactly as well? I only am paying down so much money toward future purchase if monthly mortgage payments are in access of what the current owner is paying, correct?

So basically in terms of advice or information I am looking for is in what areas am I wrong or ill informed? What would be the better option in terms of Lease Option or Lease to Buy?


How much should I expect to pay in regards to the purchase option/ lease as well as security deposit and 6 months rent up front if the house is listed at say 425,000 or 419,000 or 399,000 or 300,000?
Or is this a question better suited for a lawyer/ broker? Or could I figure it out on my own. And in terms of property insurance and taxes who's responsibilities are those.


What is a realistic market value in terms of a house be versus what its listed for?


Also one of the houses has water front property, I am very interested in this property because I see or recognize the value in terms of family as well as a future purchase that can be used primarily as a summer rental.


How should one go about contacting a home seller in this situation, basically to get around their broker?


Can I or do I need to bring in a contractor/appraiser before anything is signed?


Lastly how would the length of time of the property affect the value of the house. A year oppose to 9 months oppose to 6 months?

If i decide that it would be more financially sound to sell. The 2 year rule only applies to you when you have become the owner of the house and maintained residence for 2 years, or would it work out if I lived there as a renter for 2 years and purchased the house I could in theory sell right then and there for the tax free profit?


Sorry for being so long yet I am pretty specific in understand any and all ways in which I could be or get screwed.