Though only 70% of Americans have heard of rent-to-own homes, they're an ideal solution for Naperville property owners. If you're looking to make your property stand out, this is a great way to provide a path to homeownership for lower-income families.
You'll decrease vacancy and make some additional profit on your house before a guaranteed purchase. Read on to learn about these homeownership options in Naperville, IL.
What Are Rent-to-Own Homes?
A rent-to-own home is a property that you as a landlord buy and rent out. In this way, it's similar to any other residential property that brings you passive income. However, before renting it out to tenants, you enter a legal agreement with them to sell them the home after they have lived in it for a set amount of time.
Also known as a 'lease purchase,' rent-to-own homes come upfront with a future closing date. Usually, the tenant will sign for the home anywhere between one and three years after initially signing the lease. However, this period can be extended depending on your situation.
Usually, the legal clause for future ownership stipulates that the tenant abide by certain conditions. If the renter does not meet these requirements, the rent-to-own agreement can sometimes be broken. The most common condition is getting full rent payments on time.
How Do Rent-to-Own Homes in Naperville Work?
Rent-to-own agreements come in two common forms.
The first, 'rent credits,' have the tenant pay an additional monthly fee on top of their monthly rent. These are sometimes called 'rent premiums' and are a common clause for the rent-to-own lease. Premiums show that the tenant is serious about the rent-to-own property and gives you some additional income before handing the keys over for good.
You may also request that the rent-to-own tenant pay an 'option fee' instead of monthly rent premiums. This option fee is one upfront lump sum payment that's between one and seven percent of your property's purchase price. So, if you're renting out a $400,000 Naperville home, the option fee will be between $4000 and $28,000.
The Benefits of Rent-to-Own Homes for Landlords
There are several reasons that rent-to-own is a good clause to include in your Naperville real estate listings.
Regardless of the outcome of the agreement, you get to keep the non-refundable down payment. It protects you from tenants looking to back out of the deal and gives you some extra cash to pocket.
You also will get a higher sale price than investors who simply list properties for purchase. This is because you lock the price upfront. If the property doesn't appreciate or the value decreases, you're still going to make a higher profit (assuming that your agreement doesn't specify otherwise.)
Find and Manage Naperville Rental Homes
Rent-to-own homes are a great path to homeownership for many renters. They help landlords stand out so their rental properties will have fewer vacancies. Now that you know the ins and outs of this leasing option, it's time to get started.
PMI West Suburban offers top-notch property management in Naperville. We're committed to helping you turn the highest possible profit off your unit, so get a free rental analysis to learn more.
