Naturally, when you sell your property, "Rent-to-Own," you do so with the hopes that the tenant-buyer will actually exercise their right to buy the home, called the "Option" and cash you out.
But it doesn't always work out that way, right?
In fact, some estimates have it that 30-50% of tenant-buyers actually exercise their Option to buy property.
So what should you do?
Your tenant-buyer calls you and says something like...
But it doesn't always work out that way, right?
In fact, some estimates have it that 30-50% of tenant-buyers actually exercise their Option to buy property.
So what should you do?
Your tenant-buyer calls you and says something like...
" Hey... sorry but I can't buy your house now"
...or they might say...
" Hey... sorry but I don't want to buy your house now "
After all, it is the "Option" to buy and the "Option" not to buy, right?
...or they might say...
" Hey... sorry but I don't want to buy your house now "
After all, it is the "Option" to buy and the "Option" not to buy, right?
Alright Timeout.
Let's Consider the Following...
Let's Consider the Following...
With the clear understanding that most sellers we will work with would really prefer to sell their home at a fair price in today's market and get fully cashed out, let's take a look now at the alternative options available, assuming getting cashed out is not possible for one reason or another.
What You Get with a Conventional
Tenant and Rental
Tenant and Rental
With a conventional tenant and rental, you get from your tenant:
- One month's security deposit (sometimes two), equal to one month's rent
- Someone who never wants to own your home
- Someone with very little "skin in the game" since their deposit is small, and there's no real vested interest beyond that
- Someone with no real interest in improving upon your property by investing any of their own money into things that could bring up the property's value
- Someone who may trash your property
- Someone who will be regularly asking you to repair leaky roofs, stopped up toilets, and more
What You Get When You're Selling Your Property,
"Rent-to-Own" On Terms ...Instead of for Cash Today
"Rent-to-Own" On Terms ...Instead of for Cash Today
With a non-conventional Lease-Option ("Rent-to-Own") agreement, you get from your tenant-buyer:
- A much larger, non-refundable Option consideration fee
- Someone who wants to own your home
- Someone with a lot of "skin in the game" since their deposit is much larger than a conventional deposit, and their intentions are to own the home after 1 to 3 years
- Someone who will often ask written permission to invest in improvements to the property which may increase the property's value
- Someone who cannot ask you to fix anything when a repair is needed, because contractually, a set amount of repair cost is determined from the start, of which, the tenant-buyer is responsible
- Plus, more
Let's Look At The Worse Case Scenario
If Your Tenant-Buyer Were Not To Buy
If Your Tenant-Buyer Were Not To Buy
Assuming your tenant-buyer did not exercise his or her Option to buy your property, and assuming they've made their monthly payments on time for the entire term, you could simply take the property back.
You could then "repackage" the property and sell it again and possibly at an increase in value.
If the property has gone up in value during the lease term, and the tenant-buyer decides to give you the property back, you can always sell it again at a higher price. Or, you may decide you want to keep it as a rental for cash flow and continued appreciation.
If the tenant-buyer fails to make their payments on time, however, you could always evict them as a Lease with the Option to buy is not a sale, contrary to people who are confused with the Dodd Frank law, etc.
Since a Lease with the Option to buy is not a sale, but the Option to buy the property (and the Option not to buy it), the owner of the property, you, can evict the non-paying tenant-buyer just as you would if you were to lease the property (only) like a landlord does.
In essence, you get the benefits of:
You could then "repackage" the property and sell it again and possibly at an increase in value.
If the property has gone up in value during the lease term, and the tenant-buyer decides to give you the property back, you can always sell it again at a higher price. Or, you may decide you want to keep it as a rental for cash flow and continued appreciation.
If the tenant-buyer fails to make their payments on time, however, you could always evict them as a Lease with the Option to buy is not a sale, contrary to people who are confused with the Dodd Frank law, etc.
Since a Lease with the Option to buy is not a sale, but the Option to buy the property (and the Option not to buy it), the owner of the property, you, can evict the non-paying tenant-buyer just as you would if you were to lease the property (only) like a landlord does.
In essence, you get the benefits of:
- A potentially cash-flowing property
- A "hands off" experience, since you do not have to fix anything up to an agreed repair cost amount
- Selling your property, "As Is"
- Remaining on title and in control
- Having a tenant-buyer wants to take care of the property like you would, because they want it to be theirs
- Getting a much larger down payment/ security deposit known as the Option consideration fee v. a small, non-refundable security deposit
- And much more.