These days while people are worried about currency devaluation, some investors shift to the property market. When talking about purchasing own property for investment, we normally think of traditional house selling. Have you even come across the strategy of purchasing property with lease option? Lease option, also known as lease-to-own is a method by providing a lease agreement for the tenant to eventually purchase the property.
The followings are the pros and cons about investing in lease option for both sellers and buyers. They will help you to have new ideas for your next investment.
Why do people choose lease option?
1.Flexible alternative to buyer
Lease option is a good option for buyers who need time to build a better financial situation. If you are short on cash at this moment, this gives you extra time to prepare for a down payment. Lease option is also ideal for those who are unable to qualify for a mortgage because of bad credit. After working on improving the credit rating, you can eventually purchase your own property.
2. Trial period to buyer
Some buyers experience poor maintenance and neighborhood problem after purchasing the property. A lease-to-own agreement allows you to try out the property, as well as to feel the neighborhood environment. This could help a lot as nobody wants to take the risk of buying an unpleasant house.
3. New opportunity for seller
Imagine if you can’t sell the property at your ideal price, lease option provides you a monthly income in the form of rent, instead of having a vacant house. This ensures seller to get a continuous investment return from the property.
Why do people find hesitation for lease option?
1. Less control power to buyer
As a tenant, you don’t have the absolute control of the property. You might be able to have your favorite furniture put in the house but interior designs, like wall painting, room structure, are not controlled by tenant. If your landlord stops paying for the property, it results in a problem to leave liens on the house.
2. Risk of uncertainty and a depreciating property to seller
A lease-to-own agreement normally is in long term that lasts for years. There is a risk that buyer might decide not to purchase at the end, then you have no choice but to undergo same leasing procedure again. This is a headache as it consumes energy, time and money. Seller will also face the problem of property depreciation. If you want the property to be sold, you must sell it less than market value due to the lease-to own agreement.
3.Slow money return to seller
You got monthly rent paid by his tenant under a lease option. Different from traditional selling, You don’t get a lump sum payment at the beginning, this does not favor seller who plan to have fast investment and sell property in a short time.