How you exit the sale of your house can make all the difference in earning maximum returns on your real estate investment. A highly lucrative alternative to selling your house outright, a lease option offers a way to earn a higher return on the sale. At the end of the lease option agreement, typically one to three years, the tenants can exercise the option to buy the home or walk away, and you keep the initial option fee you collect upfront as a down payment.
You will rent out your property in the same way that you would if you had tenants. However, the stakes are considerably higher for these tenants, since they are essentially “test driving” ownership of the property. These tenants are willing to pay extra for the chance to live the lifestyle of homeowners while correcting any credit issues or building savings for their downpayment on the property. With the right tenants and a carefully crafted lease option agreement, many investors come to appreciate the benefits of this arrangement and begin investing with a lease option strategy in mind. So read on as we explore using a lease option to sell your house in Decatur.
Asking Price
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When you use a lease option to sell your house in Decatur, you set the sales price now, often above market value to account for future appreciation. This allows you to lock in a favorable price, reflecting expected growth. While you risk missing out on potential higher profits if values rise, the tenant assumes the risk if values fall. Setting a higher price also acts as a buffer against inflation, making the investment more secure. This balance of risks can motivate both parties to complete the deal.
Option Fee
Using a lease option to sell your house in Decatur means you’ll collect an initial option fee ranging from one to five percent of the sales price, though option fees of up to twenty percent are not unheard of, and the fee is typically non-refundable. With the national median listing price for active listings being around $450,000 as of May 2022, 5 percent would be $22,500, which would apply towards the purchase if the tenant exercises the option. This upfront fee provides immediate cash flow and serves as a safeguard, ensuring only serious tenants enter the agreement. It also gives tenants a vested interest in maintaining the property and following through on their intention to buy, creating a more secure arrangement for both parties.
Tenants Maintain Your Property
When you use a lease option to sell your Decatur home, you will still hold the title and be responsible for taxes and insurance, but everything else will be the tenant’s responsibility. Tenants typically carry the financial responsibilities of maintaining the home, such as lawn care, minor repairs like fixing leaky faucets, and even significant repairs like replacing appliances. Because tenants have a vested interest in eventually owning the home, they are often more diligent in keeping the property in excellent condition compared to standard rental agreements, which helps preserve and potentially enhance the property’s value.
Above Market Rent
You’ll earn above-average rental income using a lease option to sell your house in Decatur; this extra amount over the market rent is known as the rent premium. For example, if the rent is $2,000 and the premium is $300, the tenant pays $2,300 monthly, with the $300 going toward their future purchase. When the tenant exercises their option, this premium is deducted from the purchase price. If they decide not to buy, you keep the premium, which adds extra income during the lease period.
Talk to one of our highly seasoned professional home buyers at Heartland Funding Inc. today about your property, with no obligation. At Heartland Funding Inc., we want you to know you made the best deal and feel good about working with us long after the closing. That is why at Heartland Funding Inc., we’ll compare the numbers of a traditional listing vs. the lease option method and even make you an offer to buy your property directly, as-is, for cash. At Heartland Funding Inc., we’re fully transparent, providing the details of how each number in our calculations so you can make an educated decision about what works best to sell your Decatur house.
Ready to learn more about the win-win advantages for sellers of using a lease option to sell your house in Decatur? Call Heartland Funding Inc. at (800)-255-8250.