5 Benefits of Selling Your House Via Rent-to-Own in Seattle

When I was in college in 2001, I took a real estate investing class on how to buy and sell property using the rent-to-own method.  This was a great way to acquire property with little cash out of pocket, and then sell at a premium.  If you have been thinking of selling a rental property, and you have some time (years) before you “need” to have it done by, then selling your property to tenants who would like to buy via the Rent-To-Own or “Lease with Option To Buy” method, is something you should seriously consider. 

In this article, I’ll attempt to explain why!

The rent-to-own home sale scenario provides some perks that make rent-to-own an option worth considering.   First, there is a large buyer pool waiting for these opportunities.  As a Seattle-based real estate agent, I have buyers who are interested in getting into a home and becoming home owners, but need a little bit of help (or time) to get their financially.

Many tenants would love to buy the home they’re living in or seek to attain the lifestyle that homeownership affords, before they’re quite ready for a mortgage. For some landlords, locking in a reliable and responsible tenant to steward the property via rent-to-own agreements can be a great way to sell a rental property to a tenant who will treat it like their own. 

Read on as we explore five benefits of selling your house via rent to own in Seattle 

Emily Cressy in Downtown Seattle
Selling Property “Rent-To-Own” Helped Me (Emily Cressey) Progress From A 23-Year Old First-Time Landlord To A Seasoned Real Estate Professional In Seattle.

Who Gets The Equity In A Rent-To-Own Sales Contract?

As all Seattle real estate investors know, cash flow here is weak (non-existent?) around here, and the main reason to own property is to take advantage of appreciation in the home over time.

However the tenant who is going to buy the house, wants assurance that the rent-to-own contract spells out the purchase price he will pay at the end of the lease, when it is time for him to exercise his option to buy the property.

What I would suggest, is that you “split” the potential equity growth in the property.  What I have done in the past is show the tenants a chart of how much property in the area has appreciated over the past 5 years or so.  Choose a time frame that represents a strong growth-cycle for the market.  Let’s assume that we can see properties have appreciated 5% on average over the last 5 years.

You can tell the client that if they buy the property at the end of their lease cycle, they will be able to cash-in on some of that appreciation.  Then I would say that we’re going to build in a 3% price bump.  So if the property is worth $100K today (I know that doesnt exist here in Seattle, but it just makes the math easier…), then the tenant can buy the house for $103K in one year, $106K in 2 years, and $109K in 3 years.

I tend to give tenants a long period of time like a 3-year option period during which they’ll be paying rent.  This seems like a lower-risk proposition for them because they have more time to get their income and credit score to a place that they can qualify for a home loan and purchase the home. 

It also decreases the likelihood that they will actually buy the home at the end of the lease, because it’s more likely a life event (wedding, baby, job change, etc.) will alter their plans during that time.  If they leave before they complete the home purchase, than of course, you keep the property and any and all of the home price appreciation accumulated during that time goes to you. 

Large Upfront Non-Refundable Option Payment

As we know when we rent a property, we usually collect a payment for the first-and-last month’s rent, plus a refundable damage deposit.  When I sell rent-to-own properties, I like to collect an “Option Payment” from the potential buyer.  This is a non-refundable fee that is more like a “down payment” and shows that the tenant is serious about the plan to buy a home, and not just continue to rent.

Cash Offer For Your Home
When Selling Property Rent-To-Own, one of your goals should be to collect a large non-refundable option payment upfront.

In order to make them comfortable with making a large payment, I often will offer to make this option go toward the purchase price of the home.  It’s a credit toward the purchase, just like a down payment would be. 

However, you can make it non-refundable, to help give them an incentive to do the work needed to qualify for a mortgage.  It’s probably a good idea to talk to a real estate attorney locally in Seattle, or at least who knows Washington State Law.

In some cases, if your deposit is too big, you may not be able to keep it.  For example, in most real estate purchase contracts, you can’t keep earnest money funds greater than 5% of the purchase price. So this might be a reasonable number to shoot for. 

Even so, some tenants may have trouble coming up with that much money, so get as much as you reasonably can, and explain the rules in your lease-purchase agreement to the buyer so they don’t feel “burned” or “tricked” if the purchase doesn’t end up working out.  You want everyone to feel like you are honest and giving them fair dealings.  That’s the best way to avoid a lawsuit in this litigious real estate market. 

One of the fantastic advantages of opting for a rent-to-own sale for your home in Seattle is the immediate access to your deposit funds! This means you can kickstart your cash flow right away, helping to cover any expenses associated with maintaining your property.

If you like the idea of selling your rental this way, but aren’t sure about making it work with a tenant, consider selling it to a corporate “home buyer” like us here at HomePro Associates.  By partnering with a trusted local home buyer like the expert team at Keller Williams Greater Seattle, you’ll be able to see your cash in just a few days and be confident that the monthly rent payment will be coming to your account on time each month.

With our dedicated professionals working swiftly to assist sellers like you, you’ll feel empowered and ready to take the next steps!

Earn Higher Cash-Flow With A Rent-To-Own Contract

As we all know, getting on-time rental payments at full market value is what makes it possible for you to pay the underlying mortgage on your rental property, as well as other bills that come up for ongoing maintenance, vacancy, and capital expenses.

When you enter into a rent-to-own agreement with your lease/option buyer, it’s a good idea to structure two things into the process.

How To Get Higher Rent When Your Tenant Plans To Buy The House

First, you should offer to have a portion of the rent going toward their equity in the home.  Second, you should ask that the rent increases every month.

For example, if the “market rent” for the house would be something like $3,000 per month, you could ask the tenant to pay a higher rent, say $3,500 per month… and have that increase $300/month every year they’re in the home.

The advantage to them would be that every month that they paid the higher rent, they could have a $1,000 credit toward the purchase price.  This higher rent does a couple of things.  It prepares them to be able to afford the higher mortgage at the end of the lease, because a mortgage payment on a house in Seattle is typically going to be more expensive than a rent, and they need to start budgeting for that.  And it also gives them a 2-to-1 credit building equity toward the purchase of the home.  This is another way for them to start feeling like a home owner even when they haven’t bought yet.  This is an important part of the experience for them.  You could even send them annual statements showing the rent credits they’ve built up in the property.

Of course, if they decide not to buy at the end of the term and they don’t exercise their purchase option, then the extra rent would be yours to keep. 

Partnering with a professional home buyer like us at HomePro Associates ensures peace of mind, as you won’t have to stress about the buyer backing out or the hassle of finding another buyer later on. Embrace this opportunity to maximize your investment and enjoy a smoother selling experience!

You can rent-to-own nicer properties in nice areas and still get good results.
The rent-to-own method of selling property works well with nicer homes in nice areas.

How Does Property Management For Rent-To-Own Work?

Whether you’re managing your own property, or employ a property manager you know that this can be the part of the job that turns into a lot of extra work if you have a bad tenant in the property.

One of the great advantages of opting for a rent-to-own sale in Seattle is that, unlike traditional rental properties, your responsibilities as a landlord are significantly reduced. If you set up your relationship to the tenant as more of a financier, or banker, you can tell them that under the terms of the agreement, they are responsible for the maintenance of the property, just as if they already owned it.  They won’t be calling you about every clogged toilet and leaky drain – they will know it’s their responsibility to take care of those little things that come up.  You can simply focus on enjoying your income! 

Now, take this with a grain of salt.  I have had bad tenants who did not take this responsibility seriously and one of my houses developed a roof leak that they did not repair, which turned into a problem.  It’s still good to have some oversight, and let them know that you will “cap” their financial responsibilities so that if there is a major problem, it’s not all “on them” to take care of it. 

By crafting the contract wisely, you can shift the burden of routine repairs and maintenance onto the tenant, who will take pride in caring for the property as if it were their own. Plus, when you cap on the repair costs they’re responsible for both you and the tenant can have peace of mind, while maximizing your investment!

Working With A Professional Home Buyer To Sell Your Rent-To-Own Home

If you like the idea of selling your rental property via the rent-to-own method, and want to have someone who you are confident will purchase the house at the end of the lease period, then you might want to consider working with a professional home buyer company.  At HomePro Associates we are primarily real estate agents, but have worked in the rent-to-own and investment space for over 20 years. 

In this article, I have tried to give you tips for how you can create this type of agreement yourself with your own tenants directly.  In fact, there are other variations as well, such as selling the property with owner financing, such as via a land contract or wrap-around mortgage.

Why Consider Selling Your Rental Property Via A Rent-To-Own Agreement

However, there are some cases in which you may just not want the hassles.  Some of the common reasons I see that landlords want to sell on a rent to own are:

  • The primary landlord may be sick, disabled, or just tired of owning the property.
  • You don’t want to manage the property any more, but you also don’t want to SELL it while you’re still alive because of crazy capital gains tax ramifications.
  • The primary landlord has already passed (died) and the property is going into probate and needs to be sold.
  • You like the fixed income the property produces, but want to be free to travel and/or retire and not worry about management hassles anymore.
  • There is not enough equity in the home to sell outright (This isn’t common in Seattle right now, but can happen during different market cycles.)
  • There is a divorce or some other conflict going on, and neither party wants to handle the obligation of the investment property(ies) any more.
  • There has been a financial problem – like too many bills, medical trouble, job loss, etc. that makes it hard to handle the expenses of a rental property in Seattle. 

Sell My House Now

Thinking about selling your house in the next six months? Call (206) 578-3438 or fill out this simple form.
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One of the fantastic advantages of rent-to-own sales through a seasoned professional, is that we can step in and take these problems off your hand from Day One.  You won’t have to worry about paying a monthly mortgage or utilities during the time your home is on the market, which means more savings for you! 

Additionally, when you choose to sell your house through a rent-to-own arrangement in Seattle with a local expert like us here at Keller Williams Greater Seattle, you can enjoy the peace of mind that comes with no commissions, closing costs, or hidden fees taking away from your profits.

Emily Cressey is a dedicated real estate professional who specializes in strategizing to help you address your biggest real estate concerns – whether that means selling via rent to own, holding a second mortgage, doing a wrap-around-mortgage or just listing and selling the traditional way.

I am eager to purchase your home at your desired price through the rent-to-own method if you decide that’s what’s best for you.

If you’re interested in exploring the benefits of this approach here in the Seattle market, I am here to provide you with answers to any questions or concerns you may have—absolutely obligation-free!

I take great pride in assisting my Seattle neighbors with their unique challenges, and I want you to feel confident and satisfied working with me, long after the sale is complete.

Reach out to Emily Cressey at HomeProAssociates.com at (206) 578-3438 today!

Emily Cressey

Emily Cressey is a real estate broker residing in Lake Forest Park, WA who services the Greater Seattle area including Shoreline, Mountlake Terrace, Brier, Lynnwood, Kenmore, Bothell and Edmonds, WA.

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