One option that many people don’t think about but has proven to be such a powerful strategy for so many people is rent to own. If you are trying to sell your home, especially in this housing market, then you should look into this option to see if it will work for you. Here are 6 reasons why I like it so much.
One option that I love and is becoming ever more popular with homeowners looking to unload their homes, especially in this market, is rent to own also known as lease to own or rent with an option to buy.
Why do I love rent to own so much? Because, it is a win-win for both buyer and seller. Here, we will focus on the seller because the benefits for the buyer are quick and obvious. They don't need a huge down payment or very good credit and they have the option to buy the home later on when they might be in a better financial situation.
For sellers, let's look at why this is such a good option. Here are 6 reasons:
1. Upfront money. The seller receives 2 to as much as 5% of the price of the home up front as a NON-REFUNDABLE deposit just as a fee for the option to buy the home in the future. In other words, whether the tenant buys the home or not, you get to keep the upfront deposit which in Westchester or Putnam County can be between $10,000 and $20,000.
2. Good cash flow. The tenant will also pay you higher rent than in a normal rental. Yes, part of the rent, usually whatever is above market value, will go towards the purchase price of the home in the future but that's ok because right now you will be getting more money every month to help you pay the monthly expenses.
3. Back end money. You can lock in a purchase price that is 10 to 20% higher than the current market value. That means you've locked in a good profit for the next two or three years.
4. Less maintenance and headaches. You always hear people saying that they do not want to be a landlord because they don't want to fix leaky toilets at 4 o'clock in the morning. Neither do I. That is another reason why rent to own is such a great option. To the "tenant" they think that they own the house. They do not behave like regular tenants because in their mind the house they live in is theirs so they take much better care of the property. You can also have who is responsible for the maintenance of the property spelled out in the contract.
5. You attract better tenants who pay on time. The tenant will do everything in his power to keep his agreement with you because he has the end goal of purchasing the home in mind. You will also have more tenants to choose from because banks are not lending like they use to. There are more people out there renting right now and given the option to buy in the future, more people will jump at the opportunity.
6. Lastly, if the buyer decides not to buy the house....great! The tenant forfeits the extra money they gave you every month and has already given you the non-refundable deposit. You take the house back and do it all over again. Then you can collect another non-refundable deposit up front and begin to collect above-market rent again each and every month.
As you can see, rent to own is a great option. You can rent out your house right now, usually covering all you monthly expenses with the rent you collect. You beat the recession by locking in a higher sale price in the future. How can you go wrong?
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