Frequently asked questions: Lease-to-own

Mel Hahn
lease-to-own definition
Published on July 11, 2022

All your questions about lease-to-own, answered. 

Whether you’re a commercial real estate veteran or just starting out as a small business, withco’s lease-to-own model is a relatively new offering in the commercial real estate market that allows small business owners to become property owners—and there are sure to be questions. We’ve got a full breakdown of what withco’s lease-to-own model is here, and below, we’ve answered some of the most frequent questions we’ve received about our exciting new product for small businesses. 

What does lease-to-own mean? 

“Lease-to-own” is witcho’s unique model for helping small business owners purchase commercial property. In this model, withco purchases the property in partnership with a small business owner, and as part of the new five-year lease agreement, the small business owner earns a percentage of the down payment needed to purchase the property each time they pay rent to us. At the end of the lease, the small business owner can then purchase the property from withco.
Our lease-to-own model is the easiest way for small businesses to secure their real estate.

How does lease-to-own work? 

withco’s lease-to-own model is the simplest and easiest way to purchase commercial property. 

  1. First, we undergo a rigorous underwriting process of your business to determine if you are eligible for partnership and what you can potentially afford. 
  2. Once your business and space are approved for withco partnership, withco purchases your property and becomes your landlord with a set five-year lease. The lease terms will have a set rent and the eventual purchase price from the start. 
  3. You pay rent to withco, just as you would with any normal lease, only now your rent is also going towards a down payment credit that will enable you to purchase the property at the end of the lease term.
  4. At the end of the lease, withco gives you the down payment credit so that you can take out a mortgage on the property, effectively buying the property from withco. 

Step-by-step guide to withco’s lease-to-own model
Local entrepreneurs are what make communities thrive.

Do I have to stay in my current space? 

No. We are happy to help you relocate if needed. One of the reasons we undergo a thorough qualification process is to determine 1) whether or not you’re ready for property ownership 2) whether or not you can afford  the space you’re currently renting. If not, witcho will help you find a new space that better fits your business’s financials. 

Need more room? We are also happy to help you find the perfect place to expand your business that still fits within your budget. Rest assured that your success is our success, so it’s in our best interest to make sure you’re in the best possible space for your business. 

What is a down payment credit? 

Credit = cash. In a withco partnership, small businesses earn real money every time they pay rent over the course of five years. At the end of the five-year lease, they will have earned enough cash (i.e. credit) to use towards a down payment to purchase the property. withco then gifts the small business owner their down payment credit at the time of purchase, helping the small business owner avoid spending all their savings on closing costs. 

Can I get a mortgage with a 10% down payment? 

Yes, the minimum Small Business Administration(SBA) loan down payment requirement is 10% and is based on a business’s cash flow and collateral. This is why the down payment earned over the course of a withco lease is set at 10% of the future value of the property. 

How does withco determine the future purchase price? 

We are committed to setting up our small business partners with clear lease terms and a set purchase price at the start of our agreement. We do this with access to historic and industry data that helps us predict property appreciation in the commercial real estate market. Historically, commercial real estate is more predictable and stable within market fluctuations than other industries. 

Will my rent go up with lease-to-own? 

We work hard to set fair, transparent lease terms with our small business partners. We will never charge more than market rent—most of our partners pay rent consistent with their current lease, and in many cases, your rent may actually cost less on a withco lease. 

What information do I need to share to qualify? 

To start, we will need your property’s current lease and information on your business’s financial health and performance. We’ll have you link your bank accounts to our system to determine if your business is a fit for withco. Some examples of what we’ll need:

  • Your current credit score
  • Your current lease
  • Profit and loss statements, balance sheets, and tax returns dating back three years + the current year to date.

What happens if I don’t buy the property after 5 years? 

We do everything in our power to make sure business owners are set up for success to purchase property from us at the end of their lease term. We only work with business owners who want to own their properties and would consider someone not purchasing their property an outlier situation. In the event this happens, we will work with small business owners on a case-by-case basis.

More questions? See withco’s full FAQs here

Ready for lease-to-own?

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