Selling property using a rent to own agreement is becoming increasingly popular with homeowners in the Chicago area! The process is underutilized and can be beneficial for both the buyer and seller when structured properly. Learn more about how to do it in our latest post!
While a rent to own sale may not be the first thing you think of when selling your house in Chicago, it can be a beneficial option in the right situations! If you want to open the door to a whole new market of buyers, consider the many benefits a rent to own agreement can offer you!
How Does It Work?
When a tenant or buyer enters into a rent to own agreement, they are agreeing to pay (an often increased) rent each month for a specific period of time. There will likely be a down payment made to the owner in order to secure the contract. Once the rental period has elapsed, the tenant will need to either obtain a loan to purchase the property outright from the buyer or walk away from the deal, thus losing and deposit money they had invested.
Term of The Contract
When a homeowner and a tenant enter into a rent to own agreement, there are a number of terms that will need to be agreed upon before the contract is signed.
How long will the tenant be able to rent the property before a purchase? Typically, the rental period will last 1-2 years.
In many cases, a tenant will make a down payment to the homeowner to secure the contract and to show good faith. While this amount won’t be as high as the down payment for a traditional bank loan, it should be enough to keep the potential buyer from easily backing out.
To some extent, the seller is doing the buyer a favor by allowing them to rent before actually buying. While the process has many benefits for the seller, a rent to own agreement will open the door to home ownership for people who likely wouldn’t have been able to do it otherwise.
Typically, the tenant will handle the maintenance of the property during the rental period. This should be discussed between the buyer and seller and detailed within the contract.
The tenant will also likely take on the property tax payments. This alleviates a large cost for you as a homeowner.
With the deposit from the prospective buyer and the increased rent each month, many agreements will state that a portion of this money goes toward the down payment on a traditional loan.
What Are The Benefits?
Get Your Asking Price
When you use a rent to own contract to sell your house in Chicago, you will open the property up for many more potential buyers. As such, there will be more interest, giving you the opportunity to easily secure asking price within the terms of the loan.
Houses under a rent to own agreement often collect a higher rent each month. While some of these funds may be used toward the tenant’s down payment on the home, you will still be able to see great profits, as well as the security of having a tenant in place throughout the duration of the lease term.
If the tenant defaults on the agreement, the deposit and the amount paid in rent, is yours to keep. You might be back where you started, but you will be there with more cash in your pocket.
How Do I Get Started?
To get started you will want to find the right tenants to enter into the agreement with. Draw up a contract detailing every aspect of the agreement as mentioned above. Have your lawyer review the contract to ensure everything is in order. Chicago Home Buyers can make the entire process of offering your property via a rent to own agreement simple and profitable.