Creative Real Estate Lease Terms

Creative Real Estate Lease Terms

Although the downturn in the real estate sales market has increased the demand for rentals, landlords are wise to seek out creative lease terms. Adding a simple provision to an agreement that shows a tenant you value their business can go a long way toward a lease renewal, or possibly even a property sale. In short, keeping a good tenant happy is good business.

Creative Ways to Retain Tenants

    Do you have a longtime tenant that pays on time and maintains the property nicely? If so, consider giving them a break when it's time for renewal. Approach them first. Offer a discount on the first month of a new lease, or refund a portion of the security deposit. Another option is to ask if they'd like to change any of the terms; for example, the payment due date, or the option to pay their own utilities in exchange for lowered rent. You can also offer a discount if the tenant is able to pay the entire year's rent upfront.

Staying Abreast of the Rental Market

    Keep an eye on the rental market for comparable properties when it's time for renewal. If you're unwilling to lower your rental price even though the market warrants it, consider improving your property. Often simply upgrading the countertops in the kitchen, replacing worn carpeting, or painting to specifications that you and the tenant agree on goes a long way toward making the tenant feel welcome and appreciated. In addition, the improvements may last beyond the current tenant's lease term.

Bartering for Services

    If you have a prospective tenant who is balking at your asking price, ask if they would be willing to barter for services. Lawn care and pool maintenance, for example, can run hundreds of dollars a month, and are tasks that the tenant may be willing to do in exchange for decreased rent. Also, if the property is spacious, ask if the tenant is willing to reserve a portion of the basement or attic for your own storage needs. Large cities have especially great storage fees, so this can be an enormous offset that will have little effect on the tenant and will result in savings for you.

Renting to Own or Lease Option Deals

    If you're looking to sell your rental property but are concerned about your tenant, consider offering a lease option deal. In this rent-to-own arrangement, you and the tenant determine a purchase price, the tenant pays above-market rent and an option fee that guarantees the tenant the right of first refusal on the home's purchase (you may convert the security deposit to an option fee if you desire). Deals usually last between two and five years, and the option fee and the rent are credited toward the purchase.

    Lease option deal terms are highly negotiable, and both parties should hire professional representation. However, these deals can be terrific arrangements for the right mix of buyer and seller.



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