The exit strategy you use to sell your house can make all the difference in earning the highest possible returns on your real estate investment. An extremely lucrative alternative to selling your house outright, lease options offer a way for you to earn a higher return on the sale. At the end of the agreement, typically one to three years, they can exercise the option to buy the home or walk away, and you keep the initial option fee that you collect upfront as a down.
Much like having tenants, you’ll be renting out your property. However, these tenants have much more at stake than the average tenants, as they are, in essence, test-driving ownership of the property. These tenants are willing to pay extra for the chance at living the lifestyle of homeowners while correcting any missteps with their credit or building savings for their downpayment on the property. With the right tenants and a thoughtfully constructed lease option agreement, many investors learn to appreciate this arrangement’s benefits and begin investing with a lease option strategy in mind. So read on as we explore using a lease option to sell your house in Memphis.
Asking Price
One of the benefits of using a lease option to sell your house in Memphis is that you are in control of setting the sales price for the property. Unlike a traditional sale, where the market determines the price, with a lease option, you can set the price higher than the current market value to account for the appreciation you estimate will occur over the contract term. This can allow you to maximize your profits and get a higher return on your investment.
However, there is some risk involved in setting the price above the current market value. The risk lies in the fact that the tenant takes on the risk that values may drop, while you take the risk that there could be a sudden hike in values. This can make it difficult to strike the right balance between setting a price that is high enough to maximize your profits but not so high that it scares away potential buyers.
Overall, using a lease option to sell your house in Memphis can be a profitable strategy, providing you with more control over the sales process and allowing you to set a higher price for the property. It is important to work with a qualified real estate attorney and to stay up-to-date on market trends to make informed decisions about pricing and other terms of the lease option agreement.
Option Fee
Selling your house in Memphis using a lease option can provide you with an initial option fee, which can range from one to five percent of the sales price. However, option fees of up to twenty percent are not unheard of, depending on the local market conditions and the terms of the agreement. The option fee is typically non-refundable and represents the tenant’s exclusive right to purchase the property at a later date.
For example, with the national median listing price for active listings around $450,000 as of May 2022, a five percent option fee would amount to $22,500. This option fee would apply towards the purchase of the property if the tenant decides to exercise their option to buy. This can provide a valuable source of income for the seller and can help to offset any potential losses that may arise from fluctuations in the real estate market.
Overall, using a lease option to sell your house in Memphis can provide you with a valuable cash influx and give you more control over the sales process. It is essential to work with a qualified real estate attorney to ensure that the lease option agreement complies with local laws and regulations and to make informed decisions about pricing and other terms of the agreement.
Tenants Maintain Your Property
While you’ll still hold the title and be responsible for the taxes and insurance, everything else will fall on the shoulders of the tenant when you’re using a lease option to sell your house in Memphis. So, for example, tenants typically carry the financial responsibilities of maintaining the home and even making repairs.
Above Market Rent
You’ll make above-average rental income using a lease option to sell your house in Memphis; the portion of rent paid at above-average rental rates is called the rent premium. The buyers would then deduct the amount paid into the rental premium over the contract term from the sales price upon exercising the option. Of course, if there is no purchase, you’ll also keep these funds.
Talk to one of our highly seasoned professional home buyers at Memphis Home Buyers today about your property, with no obligation. At Memphis Home Buyers, we want you to know you made the best deal and feel good about working with us long after the closing. That is why at Memphis Home Buyers, we’ll compare the numbers of a traditional listing vs. the lease option method and even make you an offer to buy your property directly, as-is, for cash. At Memphis Home Buyers, we’re fully transparent, providing the detail of how each number in our calculations so you can make an educated decision about what works best to sell your Memphis house.
Ready to learn more about the win-win advantages for sellers of using a lease option to sell your house in Memphis? Call Memphis Home Buyers at (901) 828-8419.