Lease Purchase
Why You'll Love Leasing With Option To Buy! By Vena Jones-Cox
By Vena Jones-Cox
Jun 15, 2005, 23:35

The Problem with Small Rental Properties.

If you're still renting out the single family homes you own, you're missing out on a strategy that could mean more money in your pocket and less hassle in your life.

Landlords who choose to invest in single family rental properties do it for excellent reasons. These properties are more desirable to tenants than apartments; they're more "liquid", meaning easier to sell; and the tenants usually take care of minor maintenance like mowing the lawn and shoveling snow.

The biggest drawback to single family rentals is that the management and maintenance is a hassle. Tenants feel perfectly free to call you in the middle of the night to report a clogged drain or a roach problem. When a tenant moves out, you lose 100% of the income from the property all at once, AND you might very well spend thousands of dollars getting it ready for the next tenant. And unlike apartment buildings, each repair call that you make takes you to a different property and maybe to a whole different part of town.

Frustrated landlords throughout the country are discovering a program that is as popular with the tenants as it is with the owners: leasing single family homes with an option to buy.

Why You'll Love Leasing with Option to Buy.

Basically, a lease with option to buy is a strategy where you offer your tenants the right to buy their home at some future time. As part of their "option consideration" that is, the things they agree to do in order to retain the right to buy the tenants agree to do ALL repairs, maintenance, and upgrades on the home until they buy it. Why would they do this? Because you offer them the opportunity to own a home that they can fix up as they like and they don't have to pay for it until some time in the future.

For these same reasons, you'll find that your lease options command a monthly rent of up to 10% more than you can when you simply lease the same property, and that you will get a NON-REFUNDABLE up-front fee (called an "option fee") of 3%-5% of the purchase price. Think about that. Your tenant pays you MORE rent, takes care of ALL the repairs, and if he moves out without buying the home, you keep his option fee of thousands of dollars! Does this sound good to you? It will sound even better to your tenants!

Why Your Tenants Will Love Leasing with Option to Buy.

Home ownership is "the American Dream", yet it's out of reach for many people today because of credit problems, lack of a down payment, or other problems. What are these homeowner wannabes doing in the meantime? Renting. These people want and need a lease/option program and are happy to pay well for the privilege. Your lease/option agreement gives tenants time to improve their credit, the opportunity to build equity in a home while they live there, and the chance to save a down payment while "test-driving" their future home.

Because so many potential tenant/ buyers will want your lease/options, you'll be able to raise your standards to get the best possible future home owners. And not only will your phone stop ringing in the middle of the night with maintenance complaints, your tenants will actually thank you for the chance to pay you more rent and take care of your property for you.

What to Do If You Want to Do Lease/Options.

Before setting up your lease/option program, you need to understand the workings of options to buy. It's also crucial that you have well-written contracts that cover you in case there's a problem, and that you learn how to advertise and market your deals. Once you learn how to do it right, lease/optioning is no more complicated than renting your properties. But it's infinitely more rewarding.