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Benefits of a Lease Back Rental Option

build-to-rent podcast market research Sep 01, 2021

 I've got two other properties, though, that I have to worry about.

I actually want to because I self-manage those properties. And the reason I chose to do that is that both of those properties are rented out on lease options. That lease option, meaning the tenant is paying me rent, but they have an option to buy the property for a certain amount of money before a certain date. If they don't exercise that option, they don't have it anymore, they don't have the right to buy it.

Now, what's interesting about this is I'm playing a little bit of a game because they have a lease option, they kind of view these properties as they're, they're like the owner because they've got that option in place. So they want to treat it really well. So in my contract with them, maintenance is not my problem, right? And I have no management fee, these people take a check to the bank, and deposit it for their rent every month. If something is broken, I don't hear about it.

But it's a unique situation. Because even though it's not my problem, really at the end of the day, it is my problem. And I say that for two reasons. One reason being one time, one of the tenants sent me a text message, and there's this giant tree on the front lawn of one of the properties. And they told me Hey, just for here, info, this tree is looking like it's about to fall over and they sent me pictures, the roots are coming up out of the ground, it's leaning.

This is a massive, massive tree in the Midwest, it's been there for a bajillion years. And was that tenant equipped to deal with that situation? Right, even though the maintenance is their problem? Can I just leave that thing, I wasn't ready to take the risk. And so I just had a tree removal company come out there and it costs a good chunk of money, they had to take it down in pieces and then and then pull it out.

I had to kind of crossed that line from you know, maintenance isn't my problem too Well, except if it's big enough, it is because I have to preserve my asset. Yeah, what if that tree would have fallen over on it?

Yeah, what's gonna happen to the lease option? Right? They don't care, they're not gonna exercise the option.

So another problem I could potentially have here is what if they don't exercise the option, and they move out? Now I'm now I don't have a property manager, somebody's got to go over there and check this place out. You know what, it's probably going to be a dump. Because I've not been handling maintenance. I don't know what they've been doing.

Maybe it's the gold standard. Maybe they've taken perfect care of this property all this time. Or maybe it's just completely trashed. They lost that pride of ownership, you know, over time, the desire to buy it just kind of faded, right? So there's that risk. However, what if they do buy it?

What if they come through. I get a good bump, I haven't had any maintenance or management fees all along the way. They're going to pay, you know, the way you incentivize somebody to do this, as they're paying slightly below retail than what they could get on the open market. That's going to be an absolute Grand Slam. So in this case, a property manager wasn't necessary. Now, most of the people listening to this podcast are probably doing a build for rent or considering a bill for rent strategy. Because they really do plan on the long-term ownership of an asset.

They're not doing some kind of a lease option gimmick, but I've been able to see the difference between having a property manager and not having a property manager.

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