{"id":85879,"date":"2017-02-02T14:30:05","date_gmt":"2017-02-02T21:30:05","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=85879"},"modified":"2021-03-16T12:19:36","modified_gmt":"2021-03-16T18:19:36","slug":"rent-to-own-agreement","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/rent-to-own-agreement","title":{"rendered":"A Seller\u2019s Case for Signing a Rent to Own Agreement"},"content":{"rendered":"

You\u2019ve probably heard other landlords talk about rent to own agreements in the past, but have you ever considered entering into one with a current or prospective tenant? This sort of setup can afford you many benefits over the course of the agreement.<\/p>\n

How Does it Work?<\/h2>\n

In most situations, real estate investors either rent out a property or sell it. But if you have a property that\u2019s currently being leased by a tenant who\u2019s interested in one day owning real estate, then you may consider the rent to own option.<\/p>\n

\u201cRent to own, also know as lease to own or lease option, is an alternative to traditional renting or buying,\u201d Rent to Own Labs explains<\/a>. \u201cYou could even think of it as a fusion of both, since rent to own is basically just leasing\u00a0a home until you become eligible to buy it.\u201d<\/p>\n

5\u00a0Benefits for the Seller<\/h2>\n

At first, rent to own agreements may sound complex and overrated, but they\u2019re actually fairly easy to setup. Unbeknownst to many, these agreements also benefit the seller just as much (if not more) than the buyer. Check out a few of the specific advantages.<\/p>\n

1. Higher Sales Price<\/h3>\n

If you\u2019re trying to sell your property in a soft market and are having trouble, renting may be your next best option. But you may also find that a rent to own agreement is enticing to individuals who can\u2019t afford to buy a home at the moment. With a rent to own agreement, you can offer a very convenient method of financing to tenants\/buyers. As a result, they\u2019ll pay a premium.<\/p>\n

\"BRRRR-strategy-deal\"<\/p>\n

Related:<\/strong> Search rent to own Rent To Own Homes: How to Profit from a Lease Purchase<\/a><\/em><\/p>\n

2. Better Tenants<\/h3>\n

You\u2019re going to get better tenants when you have a rent to own agreement in place. They know the property will one day belong to them and will therefore have its best interests in mind. They\u2019ll take better care of things, maintain the yard, and respect the neighbors. This creates fewer headaches on your part and is worth its weight in gold.<\/p>\n

3. Guaranteed Occupancy<\/h3>\n

If you set up a rent to own agreement that lasts for five years, you essentially have guaranteed occupancy for that period of time (unless they back out). This reduces the burden of vacancy and turnover rates and helps maximize cash flow.<\/p>\n

4. Minimal Risk<\/h3>\n

There\u2019s virtually no risk for the seller in a rent to own situation. For example, if a tenant\/buyer backs out of the agreement after a couple of years, you still get to keep the property and all of the escrow money that they had put forth for the sale of the home.<\/p>\n

Related:<\/strong> Rent to Own: What Comes First, the Tenant or the Property?<\/a><\/em><\/p>\n

As Fox Business notes<\/a>, \u201cSellers can even have the buyer agree to handle all home repairs and maintenance, placing the burden on the renter if anything goes wrong with the house, and alleviates the need for the seller to act as landlord.\u201d<\/p>\n

\"work-from-home\"<\/p>\n

5. No Commission<\/h3>\n

The commission on the sale of a home can total thousands of dollars. For example, if you\u2019re selling a property for $200,000, it\u2019s likely that you\u2019d owe your agent $6,000 at the closing table. With a rent to own agreement, you don\u2019t need an agent and can keep more of your money.<\/p>\n

The Best of Both Worlds<\/h2>\n

As a landlord, don\u2019t immediately shrug off the idea of a rent to own agreement. While you may not be pursuing the sale of one of your properties right now, consider this type of agreement as a mutually beneficial option when you\u2019re OK\u00a0with the idea of unloading a property in the future.<\/p>\n

Would you consider a rent to own agreement? Why or why not?<\/em><\/p>\n

Let me know with a comment!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

You\u2019ve probably heard other landlords talk about rent to own agreements, but have you considered entering into one with a current or prospective tenant?<\/p>\n","protected":false},"author":59534,"featured_media":84132,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524],"tags":[],"class_list":["post-85879","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/85879","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/59534"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=85879"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/85879\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/84132"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=85879"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=85879"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=85879"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}