What do you do with a property that you need to get out of? Say for instance you are relocating to a new town or a new house across the street, what do you do with your old home? Do you sell it, do you lease it? There are so many possibilities for homes or properties that are no longer in use. Both selling and leasing options are viable ways of using your old home, with each having its pros and cons. If you do not want to completely get rid of your old home or can’t get rid of it at this particular point in time, your best bet would be to explore lease options, which combines a sales and a rental into one-it’s the best of both worlds.
With a lease option, the buyer provides some option money so they can purchase the property in future at an agreed upon purchase price. Normally, this option amount will be channelled towards the purchase price and is often non-refundable. In the course of the established time frame the property buyer will pay rent as per the current market rate. After an agreed upon period of time has elapsed, the buyer will get a loan and eventually purchase and own the house. If the buyer is not able to facilitate the purchase, you get to keep all monies received and put your house back for sale.
This is often believed to be the best way to find a buyer for a property because at the very least, you will have a tenant who has some interest in the property, meaning they will take great care of the property. Lease options are very popular and attractive to most buyers today; especially those who can afford to pay a monthly mortgage payment but do not have a high enough credit score to purchase a home.
Normally, the lease option comes with a 3-part contract where the tenant agrees to pay a specified amount of rent every month for the specified period of time (this amount is normally above and over the fair market rent), and lastly, the tenant agrees to pay some non-refundable option deposit of around 3 1/2% or more of the total market value for the property in question. At the end of the specified period of time, the tenant can decide to exercise the option of purchasing the property in full, or cancelling the entire deal as they may deem fit. Which would cause them to default on the contract and you would keep all money gained from the transaction.
The Lease option has both pros and cons that a property owner should consider. On the plus side, most tenants will often take good care of the property because they will end up buying the property in the long run, hence eliminates repair and maintenance costs. On the other side of the coin, though, the property will be off market for the agreed period of time with the outcome of the property assumed, but not 100% guaranteed.