Should the Tenants of Rental Properties Be Given the Option to Sign A Lease-to-Own Contract
It’s great having rental properties because they are a great source of passive income. But so can lease-to-own rental properties. There are several advantages to offering your tenants the option that they can later have a lease-to-own option for their rental home.
If a tenant can’t afford a home and has to rent because of poor credit history or from outstanding debt, and are working to improve their credit worthiness, it is a good idea to offer a lease-to-own contract. Many tenants will appreciate that offer especially if they can start the lease option contract after living in the home for a while.
Advantages of Lease-to-Own Contracts for Your Rental Properties
The first advantage of allowing your tenants to do lease-to-own is that they will most likely treat the home as their very own. They will develop a sense of pride of ownership beyond what they would normally have for rental property. The tenants will act as if they’re treating it as their own home. This means that they will be less rough on the rental property, usually keeping it cleaner, and will keep the home and better repair.
The second advantage to consider lease-to-own is because often the tenant will want to make improvements to the home on their own. This is advantageous because it shows the tenant is willing to stay longer and will be on track to eventually purchase a home. And if things don’t work out and you’re forced to evict because the tenant doesn’t pay the rent, then you have a home with improvements.
The third advantage is one that I just really enjoy. That is because I require a significant buy-in in order to start the lease-to-own contract. Depending on the sale price of the home, I will require the buy-in between $2000 and $6000. This infusion of cash will often take care of a significant portion of the expenses you had in acquiring a home in the first place… especially if you purchased a home with a mortgage.
The fourth advantage is that if you intend to sell the home anyway, you can now sell the home without the extra expense of paying realtors. That cost savings alone is huge and worthy of considering a lease-to-own contract.
The fifth advantage to consider with lease-to-own contracts is that the home is occupied until the point-of-sale. Not only do you have the home rented and you are generating income that should at a minimum cover the mortgage and repair expenses, you also have a sale without a lag of no income.
So you can see if there are lots of advantages to considering lease-to-own contracts with your tenants and your rental properties. I will wish you the best in your future landlord endeavors.
For more information check out Showing Rental Properties to Potential Tenants, How to Find the Best Tenants for Rental Properties, and Should the Tenant or the Landlord Pay For Utilities in Your Rental Properties?
Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this web site or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.