The exit strategy you choose when selling your house can significantly impact your ability to achieve the highest possible returns on your real estate investment. One particularly lucrative alternative to selling your home outright is the lease option, which allows you to generate a higher return on the sale. Typically spanning one to three years, this arrangement enables tenants to either exercise their option to purchase the home at the end of the lease or simply walk away, allowing you to retain the initial option fee collected upfront as a form of down payment.
While this strategy resembles traditional renting, the tenants involved have much more at stake than average renters. Essentially, these tenants are “test-driving” ownership of the property, making them more invested in their living situation. They are often willing to pay a premium for the opportunity to experience the lifestyle of homeowners while they work on improving their credit or saving for a larger down payment on the property.
With the right tenants and a well-structured lease option agreement, many investors come to appreciate the numerous benefits this arrangement offers. This strategy not only provides steady income but also positions you for a potentially profitable sale in the future. As we delve deeper into this topic, we’ll explore how to effectively utilize a lease option to sell your house in Manchester.
Asking Price
With a lease option, you hold the reins when it comes to setting the sales price for your property while selling your house in Manchester. Typically, this price is set above current market value to account for anticipated appreciation over the duration of the contract. While you assume the risk of a sudden increase in property values, the tenant bears the risk of potential value declines during this period.
Option Fee
When you utilize a lease option to sell your house in Manchester, you can expect to collect an initial option fee that typically ranges from one to five percent of the sales price. However, it’s not uncommon for option fees to reach as high as twenty percent, and these fees are generally non-refundable. As of May 2022, the national median listing price for active properties was approximately $450,000, meaning a 5 percent option fee would amount to $22,500. This fee would be credited towards the purchase price if the tenant decides to exercise their option.
Tenants Maintain Your Property
Although you will retain the title and remain responsible for taxes and insurance, the tenant will assume most other responsibilities when using a lease option to sell your house in Manchester. For instance, tenants typically take on the financial obligations of maintaining the property and handling any necessary repairs.
Above Market Rent
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By utilizing a lease option to sell your house in Manchester, you can generate above-average rental income. The additional amount collected at these higher rental rates is referred to as the rent premium. When the buyers exercise their option to purchase, they can deduct the total amount paid in rent premiums over the contract term from the sales price. However, if they choose not to buy, you get to keep those funds.
Reach out to one of our experienced professional home buyers at S&P Properties today to discuss your property, with no obligations involved. We want you to feel confident that you’ve made the best decision and to have a positive experience with us long after the sale is finalized. That’s why we will compare the figures from a traditional listing to those of the lease option method, and we can also provide you with a direct cash offer to buy your property as-is.
At S&P Properties, we pride ourselves on transparency, offering detailed explanations of how we arrive at our calculations so you can make an informed choice about the best way to sell your house in Manchester.
Are you ready to discover the win-win benefits of using a lease option to sell your house in Manchester? Call S&P Properties at 860-791-3614 today!