1. What is Lease To Buy Real Estate?

A lease to buy (or lease purchase) agreement is a real estate arrangement where a tenant leases a property with the option to purchase it at the end of the lease term. This calculator helps estimate the monthly costs for a 24-month lease-to-buy agreement.

2. How Does the Calculator Work?

The calculator uses these equations:

Where:

• \( Dep \) — Depreciation ($/month)
• \( Fin \) — Finance fee ($/month)
• \( MP \) — Monthly payment ($)
• \( CC \) — Capitalized cost ($)
• \( RV \) — Residual value ($)
• \( MF \) — Money factor (decimal)

Explanation: The depreciation represents the portion of the value you're paying down each month, while the finance fee is the cost of borrowing the money.

3. Importance of Lease To Buy Calculation

Details: Understanding these calculations helps you compare lease-to-buy options with traditional mortgages or rentals, and ensures you're getting a fair deal.

4. Using the Calculator

Tips: Enter the total purchase price (capitalized cost), the estimated value at lease end (residual value), and the money factor (similar to interest rate but expressed differently). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is money factor different from interest rate?
A: Money factor is essentially the interest rate divided by 2400. To convert money factor to approximate APR, multiply by 2400.

Q2: What's a good residual value percentage?
A: Typically 50-70% of the capitalized cost for a 24-month lease, but this varies by property type and market conditions.

Q3: Are there additional costs not included here?
A: Yes, this doesn't include taxes, insurance, maintenance, or any option fees to purchase at lease end.

Q4: How does this compare to a traditional mortgage?
A: Lease-to-buy often has higher monthly payments but requires less upfront cash and provides flexibility.

Q5: Can I negotiate the money factor?
A: Yes, the money factor is often negotiable, similar to interest rates on loans.