Lease options offer would-be buyers a specified amount of time to qualify for a conventional mortgage before they purchase a property while enjoying all of the perks of homeownership.
The benefits of the rent-to-own arrangement far outweigh the risks for savvy sellers. So, read on as we explore using a lease option to sell your house in Southwest Michigan.
Option Fee and Rent Premiums
When using a lease option to sell your house in Southwest Michigan, the option fee is an important aspect of the agreement. It provides the tenant with the exclusive right to buy the property at the end of the lease option agreement. If the tenants choose not to exercise their option to purchase the home, you as the seller still keep the option fee and rental premium that you have collected throughout the agreement.
The option fee is typically a non-refundable amount paid by the tenants upfront, in addition to the monthly rent payments, to secure their exclusive right to purchase the property at a later date. This fee is negotiable, but is usually a percentage of the purchase price of the property.
In addition to the option fee, the seller also collects a rental premium throughout the agreement. This is an amount above and beyond the monthly rent payments that is credited towards the purchase price of the property if the tenant chooses to exercise their option to buy.
While the tenant has the exclusive right to buy the property, the seller is still the legal owner and retains control over the property during the agreement. If the tenant chooses not to exercise their option, the seller can continue to collect rent and retain the option fee, providing a profit from the agreement.
Savings
Using a lease option to sell your house in Southwest Michigan can offer many financial benefits, including cost savings and potential appreciation of your investment property. With a lease option, you can rent your property to tenants with the option to purchase at a later date. Here are a few ways you can save money and build wealth through a lease option:
- Avoid holding costs: When you’re trying to sell a property, you’ll typically incur holding costs such as property taxes, insurance, maintenance, and repairs. With a lease option, you can pass on these costs to the tenant, who is responsible for paying rent and maintaining the property. This can result in significant cost savings for you as the seller.
- Benefit from property appreciation: While the tenant is renting your property, it will continue to appreciate in value, potentially increasing your wealth. If the tenant decides to exercise their option to purchase, you’ll benefit from the increased property value and potentially earn a profit.
- Reduce vacancy periods: If the tenant decides not to purchase the property, you’ll have had everything but your taxes and insurance covered during the lease term, while the property continued to appreciate. This can help reduce vacancy periods and generate income for you as the seller.
By using a lease option to sell your house in Southwest Michigan, you can save on holding costs, benefit from property appreciation, and potentially earn a profit when the tenant purchases the property. It’s a smart way to sell your property while retaining ownership and building wealth.
Buyers
Buyers seeking rent-to-own properties may require time to get their credit ducks in a row and build up a downpayment. Or simply wish to test drive the property, intending to remain in their home for decades to come; often, buyers are willing to take the financial risk of the lease option after having experienced bad neighbors or other issues with another property. Whatever the reason, you’ll open your property up to a real estate market sector where properties are in high demand, and you can realize significant returns by using a lease option to sell your house in Southwest Michigan.
Management
You should ensure the option and the lease remain as separate contracts. For sellers, there is very little management of the property itself involved when you’re using a lease option to sell your house in Southwest Michigan. However, your tenant screening system could make or break the deal. Working with seasoned real estate investors like the professional home buyers at I Buy SW MI and their property management team means you’ll have the best tenants.
Risk
You should be upfront with your lender about using a lease option to sell your house in Southwest Michigan to ensure there are no conflicts with your mortgage’s due–on–sale clause. In addition, acquire a home warranty that covers significant repair work or requires the tenants to pay for one to protect your investment. Typically in these agreements, the tenants are responsible for repairs up to a certain amount. Additionally, as a real estate investor with residential rentals, you must remain on top of the laws governing your properties and any changes in those laws, along with an intricate knowledge of the Southwest Michigan market, future city zoning, and economic planning to keep your portfolio as healthy as possible. Finally, it’s advisable to team up with an active local professional investor like the professional home buyers at I Buy SW MI, keeping you ahead of the game so you can adjust your investment strategies and keep your portfolio healthy.
Ready to sell your house in Southwest Michigan? I Buy SW MI is ready to buy, giving you your asking price via rent-to-own. Why wait? Our contract terms are simple, and we believe in total transparency; if you have questions about the process, we’ll answer in full detail with no obligation. At I Buy SW MI, we’re your neighbors here in Southwest Michigan; we’re proud of the work we do every day to help our neighbors and improve our community. At I Buy SW MI, our professional investors will make a deal you’ll feel good about long after you’ve left the closing table. Call I Buy SW MI at (231) 392-3262.