A Lease-to-Sell Agreement has two distinct parts:
- a traditional lease and
- the right to sell the property to realize any capital gains on a partial interest in the property.
A professional who can afford a $300,000 mortgage can enter into a Lease-to-Sell agreement to realize the capital gains on a $300,000 investment in a $2 million condominium or townhome. The monthly payment would be used to defray the cost of holding, managing and maintaining the unit including property taxes, insurance and maintenance costs. The employee would be responsible for utilities, renter’s insurance and providing onsite property management.
After 10 years, the employee could decide to realize their portion of the capital gains that have occurred on the property. Based on historic price performance in the Aspen market, it is reasonable to expect the property values to have doubled. The employee would have $300,000 in equity built from scratch through their Lease-to-Sell payments. The investors would collect the remaining $3.7 million in equity, an 85% increase on their initial $2 million investment.
The process used to secure a mortgage is extremely complex and prone to financial collapse. The Lease-to-Sell process is far simpler and designed for financial stability.
The Lease-to-Sell process is far simpler and more stable. The interests of the investor and employee are aligned in the pursuit of capital gains.
