Lease option or Seller Finance?

[Gulliver R.]

If I own a mobile home park and I own one of the homes free and clear should I sell it using a rent-to-own contract (lease option) or sell it by using seller finance? If I do the seller finance route the terms would look something like this: Purchase price is $15,000, 10% down, 5 year term at 5% interest rate = $254.76 per month payment to me Thank you!

[Mitch Messer]

Hey @Gulliver R. Three factors to consider in the lease-option vs seller finance decision:

1. Cost of Trouble: If the resident stops paying, what is the cost to get them out on a lease-option vs on seller financing? Be sure to factor in your time, court costs, attorney fees and vacancy expense.
2. Repairs: Lease-option means you're still a landlord, and therefore ultimately responsible for fixing stuff. Seller finance makes all repairs the resident's problem.
3. Pricing Potential: Generally, folks value home ownership over renting, so you can often get a higher price for a seller finance deal than for the same house as a lease-option.

There will also be tax implications that your accountant can help you evaluate.