Investors and private sellers are turning to lease options in order to sell a home they no longer want. It can be an efficient, practical and rewarding way to sell. Discover more about how it works in our most recent post!
Do you feel stuck or strained by a house you wish to sell? Have you attempted listing it without any reasonable offers coming in? With a lease option, you can sell your home for the price you want, while making an additional income up until your house closes. Continue reading to find out more about how to set it up, in addition to the advantages and disadvantages it can provide you!
What Is It?
A rent to own agreement will provide your tenant with a way to rent your home with the option to buy at the completion of the lease term. It’s usually a win-win situation that will benefit both the buyer and seller. It isn’t always the first thing a homeowner considers when deciding to sell, however as you will see below, there are a number of benefits to consider.
What Are The Benefits?
It is highly unlikely that your renters will want to break the lease. They have a genuine interest in the house and will be paying a higher than average rent plus a deposit they will lose if they choose to leave the home. If they default on the lease, the agreement is off and they are out the additional money they have spent.
Higher Than Average Rent Payments
In some cases, a part of the monthly rent payments will go toward the down payment on the home. In other cases, the higher than average rent is pure earnings. The inflated rate is the cost of letting the tenant delay the purchase by permitting them to lease.
Sell For The Price You Want
Seeing as the tenant is more eager to buy, you likely will not have an issue with them agreeing to pay the price you desire for the house. As long as it appraised at the price you desire, your tenant will pay. If you list your house on the MLS, you will not have any guarantees of getting the price you want for the home. You may even need to reduce the price if it isn’t selling right away.
Seeing as your tenant will have a much larger interest in your house, they will do more to take care of it than the average renter. They will treat the house as if it were their own, going out of their way to keep things nice.
What Are The Drawbacks?
Locked In Price
The price is negotiated from the start, so if your home’s value jumps up 20% during the agreement, you will still need to sell for the pre-negotiated price.
You Won’t See Your Cash Right Away
You should only do a rent to own agreement if you do not need the money from the house right away. While you will get a deposit and higher rent payments, the balance owed to you will not be paid for a couple of years.
How Do I Set It Up?
Setting up a rent to own agreement is similar to setting up a rental contract, however with an option to buy at the completion of the lease term. Just like any real estate agreement, the terms of the deal need to be made extremely clear to both parties. Both the tenant and the owner need to know what their roles and obligations are in relation to the house. For instance, in many cases, the tenant will be responsible for the repair work, upkeep and even the property taxes on the house during the duration of the lease period. Working with a professional such as Lone Star Real Estate Solutions LLC can assist you to make sure the agreement is handled properly.