Deciding the Price or Reward for Your Lease on Flip
Most people know that their lease is a legally binding contract. But most people don’t know that the contract itself has tradeable value. Yes, you read that right; you can make money off your lease. This means you can earn money for offering access to your own lease or you could earn money by taking over someone else’s lease. Flip makes it easy to do both, because who wouldn’t want to make a little extra money?
This is how it works. When you start a listing on Flip, you will be prompted to input a value for a price or a reward on your lease. Your decision to set a price or reward should be based on a combination of personal factors and the overall state of the market. If demand is high, someone may be willing to pay extra to take over your lease. Or maybe you’re desperate to leave and would pay someone $500 to assume your lease.
So here’s the hundred dollar question: should you set a price or a reward for your lease, and what should that value be? Here are 4 steps that will help you make the right decision.
1. How much is immediate freedom worth to you?
Congrats! You just got offered your dream job, but it has a nasty 2 hour commute. Or it might even be on the other side of the country. If you’re in this situation, you probably want to find someone to take over your lease ASAP. This means you will spend hours worrying, posting on Facebook, talking to friends and desperately trying to find someone who wants to live in your place. You might even make a sketchy Craigslist Ad. How much are those hours worth to you? $100? $500? Well, what ever you choose, that value is the amount you should assign as a reward to takeover your lease.
2. Find the price difference between your current rent and the market price.
Take a look at online listing websites like Zillow to make sure that you have a solid understanding of how the rent you’re paying compares to the rent for similar leases. When you do this, remember to take into account the difference in rental prices based on season: a lease that is rented in the cold winter months usually gets less on the market than one that’s rented during the height of the summer when more people are moving.
3. Combine what you learned in Steps 1 & 2.
rent of a comparable space in the same neighborhood — your current rent + (moving expenses + price of freedom)/2 = price of the lease
If this ends up being a negative amount, you should probably pay someone else to take your lease off your hands. If it’s positive, you can expect them to pay you.
Here’s an example: The going market rent for an apartment similar to mine is $2,800, but my rent is $3,000. It will cost $700 to hire movers, and may take 10 hours for me to find a replacement and have them qualified (if I wasn’t using Flip). I believe my time is worth at least $60 per hour, which is $600 overall. So taking this information into account: $2,800(current market rent) — $3,000(my rent) — ($700(moving expenses) + 600(price of freedom))/2 = makes for a reward of $450 that I should put on my lease.
4. Test it out!
Lucky for you, it takes just a minute or two to create a profile for your lease on Flip. If the number you arrived at was wrong you’ll know pretty soon because you won’t get any messages. If you want more buyers, lower the price or increase the reward.
Keeping everything above in mind, you should be able to get the right price for your lease. Make sure to give potential buyers as much information as possible and with a little bit of luck and some hard work, you’ll be out of your lease and on to your next leasing adventure.