Notes: The Difference Between Loans and Lease Purchases
There are a few important differences as well as commonalities between a Land Contract, or what we refer to as a Loan in the Investment Dominator and in Land Profit Generator course, and a Lease Purchase Agreement that you should understand:
- A Loan Note in the system refers to a Land Contract agreement or Installment Sale agreement between you (the Seller/ Payor) and your Buyer/ Payee. The Agreement follows a traditional amortization schedule through the length of the term and the Buyer/Payee can pay down the balance of the loan by making the scheduled predetermined payments each month, or even by making additional principal-only payments at any time throughout the term in order to accelerate the loan.
- A Lease Purchase is a lease agreement between you (the Seller/Lessor) that states that you are leasing the lot for a set period of time and that each month a portion of the rent received is earned as a “Rent Credit” that the Buyer/Lessee can use to purchase the lot after the lease term has completed. The amount of Rent Credit that is earned depends on if the payment falls within the first half of the term (calculated at 0.75 of the payment amount) or the second half of the term (calculated at 1.25 of the payment amount).
- A Loan Note has an Interest Rate that determines an interest payment that you charge each month along with a principal payment which gets applied to the balance of the loan.
- A Lease Purchase does NOT have an interest rate. It only has a monthly lease payment amount.
- A Loan Note can have a “Down Payment” applied at closing to lower the amount financed.
- A Lease Purchase can have a “Deposit” that is added in addition to the lease-purchase term and NOT used as additional rent credit.
- For both it is customary to charge a monthly serving fee which is in addition to the Loan or Lease payment.
- For both you do collect a monthly prorated amount for both the Property Taxes, as well as any HOA/POA dues of the property so that you (the Seller/ Owner) can pay these on behalf of the buyer.
- For both title is transferred only after the terms have been satisfied.
- For both the buyer is restricted from making material improvements to the lot until after title has officially transferred from you (the Seller) to them (the Buyer).
Disclaimer: Please be advised to have any and all documents provided to you in this program reviewed by an attorney for their validity and feasibility for use in any state. No guarantees of any form are being made by Get In Line – Stay In Line, LLC, Jack Bosch or any other DBA that these documents are valid in the state intended by the user of this material.