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"To Sell or to Lease? That is the question..."
Why lease rather than sell your house?
Because it is economically sensible to do so. Here are five considerations:
- The most difficult part of investing in real estate is asset acquisition. It is expensive in terms of both time and money. So if you own a house, you have already accomplished the tough part. The other part of it is simply managing the asset. If you have neither time nor the inclination to manage, you can hire this part out to a professional property-management company.
- You will enjoy the short-term tax benefits of depreciation and operating expense deductions.
- You will probably enjoy a little positive cash flow in the early-years and perhaps a substantial cash flow in the out-years.
- You will enjoy the long-term benefits of property-value appreciation.
- Throughout the investment-holding period your value is protected and you can draw against it with a home equity line of credit if necessary. Over the past 200-plus years real estate has proven to be the most secure form of investment in the United States.
Contact me if you would like a confidential, no fee consultation.
Why sell rather than lease your house?
Because it is economically essential to do so. Here are four scenarios that support selling:
- You are in a situation where you must purchase another home and you do not have the financial standing to either pay all cash, or to financially qualify for a purchase money mortgage. In this case, the cash assets from the sale of your home may be necessary to make the down payment.*
- You have lost your source of income. Consequently, due to your inability to pay the mortgage, retaining the property would threaten your credit standing.
- You are either approaching retirement or already retired, and wish to enjoy the fruits of your labor. In this case you are no longer interested in portfolio growth.
- You have discovered a better investment opportunity for your cash.
Contact me if you would like a confidential no fee consultation.
*Note: There is an alternative for obtaining down-payment cash so that you can keep the asset as a rental. If you have substantial equity in the home, and interest rates are favorable, you may be able to do a cash out re-finance. You might also be able to obtain a home equity line of credit; if the combined payments on the first mortgage and the line of credit do not severely, negatively impact the cash flow on the rental.
Why lease a property with the option to buy (lease purchase)?
A lease purchase is nothing more than a sales agreement, with an extended closing date, and a lease to control between initial occupancy and closing.
Why would a Seller offer a lease purchase arrangement?
There are times when a homeowner wants to sell, but is unable to for a variety of reasons. If the reason has to do with insufficient equity in the subject property, a lease purchase may be a good alternative. Depending on how the contract is crafted, you may be able to capture some equity on the front end from the tenant deposit, and over time, to the extent that monthly payments exceed the rental rate. You may also build in contract provisions for sales price acceleration to match valuation at the time of closing. The lease purchase method of selling is often considered complex, but it really is not, if you have professional guidance. If you want to know if this method is right for you, contact me for a confidential no fee consultation.
Why would a Buyer want a lease purchase arrangement?
You want the benefits of owning a home, but are unable to obtain financing through a conventional source today. You are convinced that you will be able to get the necessary financing after the passing of time. It would make sense for you to consider lease purchase, because you may be able to trap the sales price at today’s terms, while gaining the stability of a contractual relationship. Usually, owners will be more flexible with your wishes to decorate and upgrade the home to your preferences, because you are willing to make a substantial commitment to purchase. Lease purchase is not the right choice for all people. Make sure you get professional advice before entering into such an agreement. If you would like to discuss your situation, contact me for a confidential, no fee consultation |