Net Lease of Equipment as Personal Property with Option to Purchase is a type of lease agreement in which a piece of equipment is leased from a lessor to a lessee for a specified amount of time, with an option to purchase the equipment at the end of the lease term. This type of lease is commonly used for businesses that need short-term access to equipment and do not wish to purchase the equipment outright. The most common types of Net Lease of Equipment as Personal Property with Option to Purchase are: 1. Fair Market Value Lease: In a Fair Market Value Lease, the lessee has the option to purchase the equipment at the end of the lease term for the fair market value of the equipment. 2. Fixed Purchase Option Lease: In a Fixed Purchase Option Lease, the lessee has the option to purchase the equipment at the end of the lease term for a predetermined price. 3. Right of First Refusal Lease: In a Right of First Refusal Lease, the lessor has the right to purchase the equipment at the end of the lease term before the lessee can purchase the equipment. 4. Right of First Offer Lease: In a Right of First Offer Lease, the lessee has the right to purchase the equipment at the end of the lease term before the lessor can purchase the equipment.
Net Lease of Equipment as Personal Property with Option to Purchase
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Example of a Lease Option In this case, the buyer-tenant pays an extra 3% of the total house price as a fee for the lease option. They also pay a premium on their monthly rent. They then have the option to buy the house they currently live in two years in the future at current market prices.
Cons. Typically requires an option fee in addition to your rent payments. Market shifts during your rental period may affect home value. Risk of losing money if you ultimately don't qualify for a mortgage or decide not to purchase the property.
To make money with a lease option the investor must find a renter to pay more than the amount the investor agreed to with the property owner. For example, if the investor agreed to pay $1500 each month but finds a tenant to pay $1800 each month, the investor makes a monthly income of $300 for the property.
In a Lease-option purchase, often called ?lease-to-buy? or ?lease-to-own,? a renter enters into a legal contract with the owner of the property stating that a percentage of the rent will go toward purchasing the unit. Often, the purchase price and length of agreement are pre-determined.
Cons. Typically requires an option fee in addition to your rent payments. Market shifts during your rental period may affect home value. Risk of losing money if you ultimately don't qualify for a mortgage or decide not to purchase the property.
The equipment account in the balance sheet is debited by the present value of the minimum lease payments, and the lease liability account is the difference between the value of the equipment and cash paid at the beginning of the year.
Pros of a rent-to-own home You don't have to wait for improved finances.You can build equity.You don't have to buy the house if you don't want to.You can lock in the house price.You might lose money.You might have to pay more fees.You might have to purchase the house.You aren't guaranteed financing.