Texas Real estate investors and even private home owners are turning to sell their unwanted house using the lease options method. It can be a practical, efficient and lucrative way to sell. Learn more about how it works in our NEWEST post!
Here is a question? Do you feel stuck or burdened by a home you want to sell? Have you tried to listed it without any reasonable offers coming in? Did you have a lot of people see it but no offers you could accept? With a lease option, you can sell the house for the price you want, while making an extra income until the house closes. Keep reading to learn more about how to set it up, as well as the pros and cons this strategy can offer you!
What Is Lease To Own?
A lease to own Contract will give your tenant a way to lease your house with the option to buy it any time during the time of the contract. A lease to own contract is usually from 2 to 5 years. This gives the buyer time to fix his or her credit or do what is needed to get a traditional loan to buy the house. It is typically a win-win situation that will benefit both the buyer and seller. It isn’t always the first thing property owners think of when deciding to sell, but as you will see below, there are a number of benefits to consider.
What Are The Benefits?
It is highly unlikely that your tenants will want to break the lease. They have a sincere interest in the house and will be paying a higher than average rent plus a deposit they will not want to lose if they decide to leave the property. If they default on the lease, the agreement is off and they are out the extra money they have spent.
Higher Than Average Rent Payments
In some cases, a portion of the monthly rent payments will go toward the down payment on the house. In other cases, the higher than average rent is pure profit. The inflated price is the cost of letting the tenant postpone the purchase by allowing them to lease till they can purchase the house traditionally.
Sell For The Price You Want
Seeing as the tenant is more eager to buy, you will have a problem with them agreeing to pay the price you want for the home. They see it as an opportunity to get a house. They don’t mind paying a bit more for the opportunity you are giving them. As long as it appraised at the price you want, your tenant will pay. If you list the house on the MLS, you won’t have any guarantees of getting the price you are looking for or thing you should get. You may even have to lower the price if it isn’t selling right away or the buyer want money off because things that need to be fix.
Seeing as your tenant will have a much larger interest in the house, they will do more to take care of it than the average renter. They treat the house as if it were their own, going out of their way to keep things nice. They paint it and do additions to make it the house they want because in their mind they are the owner. This is a win win for both you and them. Because the house looks better and may appraise for more when it is time for them to buy.
What Are The Drawbacks?
Locked In Price
The price is negotiated form the beginning, so if your home value jumps up 20% during the agreement, you will still have to sell for the pre-negotiated price. This can be a good and bad thing. It is good for you because they can get a loan with closing costs. But bad because you may see it as loosing money. but remember you have been collecting those higher payments so it makes up for the inflation.
You Won’t See Your Cash Right Away
You should only do a rent to own agreement if you do not need the cash from the house right away. While you will receive a deposit and higher rent payments, the balance owed to you won’t be paid for a couple of years. Thing of it as an investment down the road.
How Do I Set It Up?
Setting up a lease to own agreement is similar to setting up a rental agreement but with an option to buy the house added. As with any real estate agreement, the terms of the deal should be made VERY CLEAR to both parties. Both the tenant and the owner need to know what their roles and responsibilities are in relation to the home and they obligations. For example, in most cases, the tenant will be responsible for the repairs, maintenance and even the property taxes on the home during the duration of the lease period. Working with a professional such as The Aida Group can help you to ensure the agreement is handled correctly. We can even help you with getting a tenant buyer because we have many waiting for one of ours to come on the market.