Lease Options: Why Owners of Single-Family Home Investments Should Consider Offering Them

As an investor in single-family homes, should you offer a lease option (or “rent to own”) opportunity to your renters? Try these five reasons on for size:

1. You May Be Able To Charge More Rent

Offering a rent to own option usually will enable to charge a higher current base rent payment. The increased rent may be credited against the purchase price if the tenant then exercises his option. Typical rent to own contracts may be 10% to 15% higher than a standard market lease. So if the market rent is $1,500 for a home, you may be able to set the rent to own monthly rent at $1,750. (The additional $250 becomes a home-buying credit for your renter.)

2. You Are the Good Guy

Many people want to own their home. They may have owned and sold one or several previously, then fallen on hard times, and become apartment dwellers. A recent Allstate/National Journal Heartland Monitor poll found that “Older and younger Americans generally regard homeownership as a smart and achievable goal in equal numbers: 72% of older respondents said that they felt this way, and 69% of younger Americans responded similarly.” The rent to own options provides your renters a path to home ownership.

3. Your Tenants Tend to Care More

Your potentially long-term renter/happy buyer may care for the house more than your average wonderful tenant. lease term. Why? Because the house could become their home at the end of the lease term. And because you can put in the rent to own contract that as home-owners-to-be, they are responsible for specified home repairs and maintenance.

4. You May Have Reduced Turnover

Most rent to own options are structured as long term contracts, usually from three to five years. By contrast, the standard lease is for one year, or perhaps six months.

5. You Provide an Incentive for On-Time Payment

You can put this in your contract: if your tenant does not pay on or before the monthly due date, they forfeit the portion of that month’s home-buying credit.

For more information on why your should consider investing in a professionally managed portfolio of single-family homes, please contact Harold Willig at 917-209-4452 or harold.willig@springviewinvestments.com

Harold Willig is the Manager of SpringView Investment Management, LLC, which he founded in 2012. Mr. Willig also served as HFZ Capital Group’s Chief Financial Officer, and was responsible for the oversight of HFZ's Finance and Accounting team. He has over 16 years of finance and accounting experience. Mr. Willig also ran a consulting practice and provided valuation, analysis, and transactional support services to multi-billion dollar real estate companies. Previously, Mr. Willig served as the Senior Controller and Vice President of Financial Analysis and then the Chief Financial Officer of the Athena Group, a multifamily development company and fund manager.

This post does not constitute investment, tax, legal, or real estate advice. It is not a recommendation or an offer to buy or sell. No warranties implied. Past performance does not guarantee similar future results.