While many residential rental property owners focus on leasing to tenants, in some cases, there may be a tenant who wants to eventually become an owner. Provided that you have an interest in selling, it is possible to set up a lease to own contract. As long as this is properly executed, there can be benefits for both parties – including securing a buyer without having to put the home or condo on the open market.
Lease to own contracts are rental agreements that include either a purchase option or a purchase guarantee. These arrangements typically allow a tenant(s) to lease the property while at the same time using a portion of their rent to go towards the down payment to purchase it.
So, the contract technically acts as a lease and a purchase agreement. In it, there are typically two key components. These are the:
- Rental / lease agreement
- Purchase option
The rental agreement portion of the contract is much like a regular lease, and it will include all of the items that are normally covered in a lease, such as due date for the rent, and the responsibilities for both the tenant and the landlord/property owner.
In the purchase option component, the tenant is usually given the right to buy the property on a pre-selected date. Generally, the tenant is required to put down an “option fee” – and in most cases, this is not refundable, even if they decide later not to purchase the property.
The purchase portion of the contract will also cover the price at which the tenant will buy the property, as well as how much of each monthly rent payment will go towards their down payment.
During the time that your property is still a rental, you will likely continue to collect rent, maintain the premises, and respond to emergencies. But handing these – and other – duties over to a property manager can free up more of your time to focus on other obligations.
In addition to taking on tenant and property-related issues, some property management companies can also assist with offering tax and financial information that relates to your real estate investment business. This, in turn, could end up saving you at tax time.
If you own residential homes and/or units in Orlando or the surrounding Central Florida locale and you’d like to learn more about how working with a professional property management team could benefit you, give us a call and we’ll provide you with more details.