Property Leasing :

CONSIDER THE LEASE OPTION

If you want to increase the amount of income you receive
from your rental property, a better way to do it is to offer the
house on a lease option.

Briefly, here's how it works: tenants lease a house with an option to buy it under specified terms.

They pay a higher rent, with all or most of the excess being
credited toward their down payment. For instance, if market
rents are Rs. 5000, your tenants might pay Rs. 7000, and Rs.2000 a
month is credited toward their down payment. At the end of the
option period, the tenants have three choices. They can renew
the option; they can pay a lump sum to make up the rest of their
down payment, thereby buying the house from you; or they can
move out so that you can put new lease-option tenants into the
house. Whichever choice they make, the extra $200 a month
they paid in rent belongs to you, and you do not have to give it
up.

There are many other ins and outs of lease options, and you
should study the principles carefully and discuss them with your
own attorney before you rent property on these terms. But it is
not a difficult subject to understand or to explain to tenants, and
many investors rely on this techniques to bring them higher
rents. Oddly enough, very few tenants ever actually exercise
their options and buy the houses they lease on these terms.
That's unfortunate for them, since it is such a simple and
relatively inexpensive means of buying a first home. However,
that shouldn't stop you from offering them the opportunity, and
you will receive a better return on your investment property by
doing so.

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