- July 31, 2020
A lease option is a tenant-landlord agreement that allows the tenant to buy the property they have rented, either within the rental period or after it is over. Most real estate investors set the time frame from one to three years, depending on the cost that they have agreed upon. It is an excellent opportunity for potential homeowners who don’t have the financial capability to buy a home upfront and lack a favorable credit profile to allow them to get a mortgage.
A lease option will benefit both the tenant and the landlord. As the latter, here are the advantages to enjoy.
Fast Property Sale
If you have been encountering problems selling your property, a lease option is ideal for you. It increases your chances so that at the end of the rental duration, you will have sold your home. This saves you the expense of creating and publishing ads as you look for potential home buyers. Also, you can sell the property faster, though it will depend on the price the tenant needs to pay for the house and the agreed rental period. Normally the renter will pay from 5 to 10% of the total purchase price for the option to purchase.
Timely Rent Payments
Again, if a tenant is looking for a rent-to-own option, it means that they are financially responsible and ready. Therefore, there is a high likelihood that they will pay the rent on time so that at the end of it all, they will have the home they desire to own. This allows you to avoid reminding them to pay what they owe at the end of each month, which is frustrating, and it can also create some tension between the two of you.
Low Maintenance Costs
This is another benefit that you get as a landlord once you opt for a lease option. When a tenant wants to own your house, they are going to take the best care of it because it is their investment. No one wants to spend money on something that is poorly-maintained and less likely to last. It makes things a lot easier, not only for you but also for the property managers you have hired because they do not have to take care of the home alone. The list of advantages is endless, that said, it is always advisable to consult a real estate professional to learn more about lease options.
Before signing the lease-option agreement, you ought to know a lot about it, including how the contract is structured.
Typically, in a lease option, the tenant will pay the landlord above-market rent so that part of it becomes the property’s down payment. The contract will state the responsibilities of each party. These include the one to pay for any repairs and maintenance costs as well as homeowners association fees. If you are a tenant, make sure that you get renter’s insurance, and the landlord should also buy landlord insurance.
Then, it is best if both parties look for qualified and experienced real estate attorneys to guide them through the entire process. This helps to avoid common pitfalls that can bring about complications later on, and render the deal unsuccessful.
As a tenant, be cautious when signing lease option contracts. Even though they are pretty attractive, they are not suitable for everyone. If you are not comfortable with the terms, you can always look for alternative options.