How Lease Options and “Subject To” Differ

In my last article, I shared with you how lease options and buying a property “subject to” were similar. While the mechanics of how they are implemented is very different, both offer you the ability to control a property–without getting a new loan–and, if you market and structure it correctly, can allow you to profit both on an up front deposit, on-going monthly cash flow and a large back end pay day when you sell the property.

So, what is different between using a lease with an option to buy and buying a property “subject to” the existing financing?

First, when buying a house “subject to” you are actually getting the deed to the house which will make you the owner of the house. This may give you tax benefits that you do not get with a lease option-check with you tax adviser for details of how that might apply to your unique tax situation.

Second, with a lease and an option to buy you have the option to buy, but you are not obligated to buy. That’s different than buying a house “subject to” where you are buying it at the beginning and need to be committed to following through with the deal.

So, it should be a bit clearer that you have more options with a lease option, but lose some potential benefits.

Until my next post,

James

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