Rent to Own Offers Sellers Advantages

Homeowners that can’t sell their houses may want to consider the advantages of selling it as a rent to own.

A lease-to-own house purchase (also “rent-to-own purchase” or “lease purchase option”) is a lease combined with an option to purchase the property within a specified period at an agreed-upon price.  The tenant/buyer (aka the borrower) usually pays an option fee, 1% to 5% of the price, which is credited to the purchase price.  The tenant/buyer pays rent, and an additional rent premium that is also credited to the purchase price.  If the purchase option is not exercised, the tenant/buyer loses both the option fee and the rent credit.  Rent to Own agreements usually run about 3 years, but I have seen them as short as 1 year and up to five.

As with any kind of financial contract, lease-purchase deals can be structured in such a way that all the benefits flow to one of the parties and none to the other.  Tenant/buyer especially need to be careful because there are many poorly written contracts out there.  So if you are a tenant/buyer make sure you have someone very knowledgeable on rent to own agreements review them.

Lease-purchase plans have a sound economic rationale, which means that they can be structured so that both parties benefit. Lease-options can be especially advantageous for home sellers. Many sellers like lease-options because they provide necessary cash flow to pay the mortgage and property taxes from a tenant who has a vested interest in treating the property well and who is likely to buy it.

Some additional benefits include:

• Selling your home for top dollar, even if demand is low for your property

• Saving thousands of dollars on commissions

• Reliable cash flow

• No long vacancies

• Retain tax deduction benefits

• Virtually eliminating all risks associated with land lording

• Never worrying about home maintenance headaches again

So, if you need to sell your house, I encourage you to consider selling it as a rent to own.

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