Lease to own for a metal building, has anyone done it this way?

[STx]

We've had our house listed for a while now with the intention being to sell it and use cash to pay for our build on our property. Well, the real estate market hasn't cooperated and it's looking like low oil prices have finally caught up with housing here in Houston so we're looking at plan B. I would prefer not to take on additional "debt" but, I'm paying $1200/mo to rent shop space right now and I'd really rather be paying that money towards something I own (or will own one day) than continue to flush it down the drain on rent. I've also been warned that my rent will be going up when my lease expires in March and I expect it will be more like $1500/mo when I renew.

So, I'm looking at financing options to go ahead and get the shop built so that we can relocate that and at least save the rent and everything that goes with renting the shop. We considered doing a Home Equity loan or line of credit but since our house has been on the market in the last 3 months, we don't qualify for that. It looks like most of the metal building manufacturers offer a lease option to finance their buildings which has some obvious tax advantages and should actually lower my monthly cost but of course I'll be paying $65k for a $50k building by the time it's all said and done. But, this option could get us into our own shop instead of renewing my current lease for a year, which would save me somewhere between $14k and $18k in rent payments so the financing cost is really a wash...

Anyway, I'm just wondering if anyone else has ever gone this route and how it worked out for them. Also, how was the approval process on the financing? Any other advice that those of you who have gone this route would offer?

Thanks in advance.

 

[EddieWalker]

I wouldn't do it. Especially if your house is sitting on the market. Here in Tyler, about 4 hours North of you, houses are selling in days after being listed. Inventory is low and the agents are crying because they have more buyers then sellers.

It's either price or presentation. A good realtor will tell you the hard truth of why people don't want it. Sadly, most home owners don't realize that their personal taste isn't for everyone, and they can't get over a color, or too much clutter. Staging is huge!!!

If the house is perfect, then you are too high on price. If you are willing to through away $15,000 on leasing as a way to finance a metal building, I would much rather lower the price of the house by that amount.

 

[STx]

It's not price or presentation, it's a slowing real estate market and bad timing in listing (we didn't get it listed until August). Our only real drawback is that we have all bedrooms up but otherwise, the house shows very well. Feel free to look for yourself - 20919 Autumn Redwood Way, Cypress, TX 77433 - HAR.com. We're priced a little low for our area but since the Houston economy is more heavily dependent on oil than they would lead you to believe, inventory is starting to build, a lot. Oil companies and their supporting services are laying off every day, the new residents that were expected with the huge Exxon campus being built about 30 minutes from us haven't materialized because of the layoffs and people here are starting to worry.

I think we just missed this boom and we're probably going to have to wait out the cycle but that's likely to be 5 - 7 years, unless oil goes back up to $100bbl tomorrow, and I'm not going to give the house away.

Without going into a lot of detail, even with the lease costs, we'd come out ahead financially in the long term. My question is really for anyone that has done it whether there was anything they know about it now that they wish they had known in the beginning. I've done equipment and vehicle leases in the past so I'm familiar with the basics, just not sure if there's anything different/special about these.

 

[Sprinklerman]

Nice house , I am near annapolis Md , around here that house would sell for $ 500 K easy . And thats not waterfront .

I am not a fan of leases.

 

[EarPlug]

Leasing to own is just basically another form of "financing". What is the interest rate vs a bank loan? What happens at the end of the lease? Balloon payment? Some other kind of buyout? It all comes down to cost of money.

Who owns the land the building will be on? Can you walk away at the end of the lease?

Leasing for business does have tax implications vs a loan.

 

[STx]

It's a 10% residual buy out. We own the land and intend to keep the building. The financing is expensive but so is renting the building we're in now. With my own building, my monthly payment goes down and I own something at the end of it. We also get to keep the house, which will b e paid off in about 10 years, instead of renting a place for our daughter so long term it's a win, even if it is a bit more expensive.

Ideally, we'd use home equity at a lower rate but we can't do that for 3 months (the house comes off the market Monday) and my current shop lease is up March 1st so if I don't have something started by then, I'll have to renew for a year and there goes the $15k that I would have to spend to finance the building, so to me it seems like it makes more sense to spend it on something I get to keep, especially since that way the $15k is spread out over 5 years instead of being $15k/yr. This is the sort of thing I'm seeing with essentially all of the different manufacturers - Metal Building Depot.Com - Financing.

It would be a business lease so there are some tax advantages to doing it this way as well.

 

[STx]

Nice house , I am near annapolis Md , around here that house would sell for $ 500 K easy . And thats not waterfront .

I am not a fan of leases.

Thanks, we're not actually waterfront, we're on the greenbelt, which is basically a nice wide, common green space with a walking path. There is a drainage ditch that runs along the greenbelt as well but it's just a trickle unless we get a heavy rain.

 

[EarPlug]

It's a 10% residual buy out. We own the land and intend to keep the building. The financing is expensive but so is renting the building we're in now. With my own building, my monthly payment goes down and I own something at the end of it. We also get to keep the house, which will b e paid off in about 10 years, instead of renting a place for our daughter so long term it's a win, even if it is a bit more expensive.

Ideally, we'd use home equity at a lower rate but we can't do that for 3 months (the house comes off the market Monday) and my current shop lease is up March 1st so if I don't have something started by then, I'll have to renew for a year and there goes the $15k that I would have to spend to finance the building, so to me it seems like it makes more sense to spend it on something I get to keep, especially since that way the $15k is spread out over 5 years instead of being $15k/yr. This is the sort of thing I'm seeing with essentially all of the different manufacturers - Metal Building Depot.Com - Financing.

It would be a business lease so there are some tax advantages to doing it this way as well.

Looks like a good plan for you. However, the chart comes out to a little over a 10% interest rate plus a $5k buyout at the end. If this is for a business check with your business bank and CPA on the best way to make this purchase/lease.

More than likely the Builders are getting a commission for "arranging" the financing. They will just be shopping the paper to some leasing/finance company.