Benefits to Lessor
Lease option tenants (Lessee) will generally tend to treat or take care of the house better since they will soon own the property compared to a tenant of the house.
They will generally keep the house clean, take care of the flooring or carpet and will clean it more regularly and will generally take care of minor repairs too.
Lessee may under the terms of the lease option be required to take or assume the minor repair or maintenance works as they will assume ownership of the property someday. The benefits of doing so have to be explained to the lessee to minimize non compliance by the Lessee.
Lessor saves on agent commission and GST since they find the buyer themselves. This is because in most lease option deals—the seller can avoid paying this fee, thereby saving thousands of dollars
Incentive for responsible payments – This is because the lessee may have paid a fairly hefty option fee to move in, hence they have extra incentive for paying rent promptly to eventually own the home. Hence they will generally be more responsible in ensuring performance
Turnover rate and costs reduced – As a lease option lessee has a different mindset than a traditional tenant: they want to be buyers. Hence they are far less likely to suddenly move out, and this means you will have fewer vacancy expenses in your business. Additionally, if the tenant does move away, you have a security deposit as well as the option fee they paid at the beginning, so you won’t lose as much money.
Lessor may possibly have a higher sales price – When you sell to a lease option buyer, they are typically less concerned with achieving the lowest bottom prices that many traditional buyers seek. For those looking for a rent-to-own house, the price is far less important than the terms offered to be able to own the property
While a lease option agreement offers some clear benefits for the lessor (owner), there are also numerous benefits for the lessee.
Benefits to Lessee
Sales price is locked in lease option deal – In the lease option contract, part of the contract is an option to buy, which specified the future purchase price on the property. This means that if a purchase price of RM 400,000 is agreed upon by the lessee and lessor, this price is locked in and cannot be changed if the tenant/buyer abides by the terms of the agreement and ends up buying the home. Even if the value of the home rises to RM500,000, the tenant/buyer can purchase it for the earlier specified price of RM400,000.
A home of their own – Although the tenant may legally own the property yet until all terms has been complied, a lease option lessee feels much more like a purchase than simply renting. This can give the tenant a feeling of security and pride of ownership.
A test drive plan for home ownership – Many tenants may not know the right way to begin to buy a home. A lease option allows them to “test drive” a home while creating a plan to actually buy the property. From allowing them to learn how much they’ll need for a down payment to giving them time to build their credit or balance payment, a lease option can help guide a tenant into a home ownership.
Stability in the home – Finally, by signing a lease option with a seller, a tenant has the ability to lock in a number of years in which the owner cannot legally sell the property to anyone else. This relieves the tenant’s fear of being kick out by the owner.
To read earlier blog post - [Lease Option ~ A Strategy for Property Invesetor]1
「If this article is useful to you, feel free to buy me a coffee ☕」
Danny KO @ RPC
If this article is useful to you, feel free to buy me a coffee ☕
