Suppose you own a home and can wait out the term of a lease option to exit the property, typically from one to three years. Or perhaps you have a property you’ve had trouble selling. In that case, a lease option is an excellent sales method that can be pretty lucrative—combining the benefit of a flip by receiving a hefty option fee at the beginning of the contract with the benefit of long-term renters.
Of course, tenant screening should always be top-notch with lease options. First, you’ll want to perform a rigorous review to bring in highly qualified tenants, staying within all local, state, and federal guidelines governing tenants. Then, with the right property and the buyers in place, you could cash in on this advantageous method of selling real estate. So read on as we discuss how lease options work for your Belleville house.
Sales Price
Lease options can be an advantageous strategy for selling your Belleville house as buyers are often willing to pay extra for the benefits of homeownership while having the time to ensure they like the property, repair credit, or save towards a down payment. Additionally, because you must estimate the future market value of the property, you can set the sales price above the current market value. While there is a risk of market prices soaring far above this number, you can mitigate the potential impact down the road by cushioning the sales price now. Conversely, the buyers take the risk of home values falling and potentially owing more for the property than the market value. By offering a lease option, both you and the buyers can benefit from the arrangement. Buyers have the opportunity to secure a property they want to eventually own, while you can set a higher price and receive the financial benefits of a sale.
Option Fee
One of the benefits of using a lease option to sell your Belleville house is the potential for a large influx of cash. The fee for the option typically ranges between two and five percent of the home’s sale price, providing an additional source of income for the seller. For instance, with the average sales price of homes reaching an all-time high of $400,000 in May of 2022, a seller could potentially collect up to $20,000 for the exclusive right to buy the home by exercising the option. Additionally, the option fee is typically non-refundable, which means that the seller will retain the fee even if the buyer decides not to exercise their option. Collecting an option fee can provide a financial benefit and a level of security for the seller in a lease option agreement. Overall, a lease option can be an advantageous strategy for sellers looking to sell their Belleville house and generate additional income.
Rent Premium
Lease options can also provide increased monthly cash flow for sellers of Belleville houses through higher rental rates. With a portion of the rent payment applied towards the eventual down payment, sellers can charge a rental premium above the market average. This premium amount must be above the market average for many lenders to consider it for the down payment. Therefore, it’s important to check with mortgage lenders about the terms of the lease agreement. By charging a premium, sellers can generate additional monthly cash flow while also helping the tenant build equity towards the eventual purchase of the property. Overall, a lease option can be an advantageous strategy for sellers looking to generate additional income and provide an attractive option for buyers looking to own a property.
Eliminate Holding Costs
Essentially, lease options work for your Belleville house by delaying the sale while your tenant covers your mortgage payments and utility costs that you would have paid monthly to hold the property. In addition, depending on the agreement, the tenants are also responsible for maintaining and repairing the property as if it were their own home. However, some contracts have shared responsibility for more significant repairs exceeding a specific amount, such as $500.
The local professional home buyers at Cardinal Creek Properties understand how lease options can work to your benefit for your Belleville house. Our full-service in-house network of professionals can help you handle everything, from locating the perfect property to selling through a lease option to property management and everything in between. At Cardinal Creek Properties, we have the connections and the team to do the job. Let us help you earn the highest possible returns on your real estate investments because we win at Cardinal Creek Properties when our investors win. Let the seasoned professional home buyers at Cardinal Creek Properties help you. And don’t forget to ask about our current inventory of the best lease option properties available in Belleville. Call Cardinal Creek Properties at (314) 467-8137.