Thread: No Sale-Rent to Own as an option

Hello-

I suggest you contact a local Realtor and have them help you establish a monthly rental fee. They have experience in these matters and access to information that is unavailable to you.

Furthermore - before you get involved with any lease to own scenario - you better have a good understanding of why the lessee is unable to buy now - and how the sale will eventually be consummated. Again - this is an area where a Realtor knows the questions to ask - and will help you structure a contract that will fulfill your goals.

Good Luck-
Glenn

It sounds like you are on the right track although there will be arguments that they should just be paying market rent.

But my opinion is if they are renting to own they should be paying something close to what a mortgage payment would be. If they can't afford the mortgage payment then they are not ever going to buy the property which makes them renters.

Watch out for the investors who want to rent to own for cheap from you so they can rent it to someone else for more. Maybe include a no sub let clause in the contract. If your house is going to get trashed by renters you may as well be making all the money.

Geyour real estate salesperson involved. There are many issues in a "lease to own" situation.

Is there option money, how much, does the contract clearly make the option money non refundable? Does the contract have any of the rent applying towards the purchase price? Lenders will not recognnize this and of they do, it would only be the portion of the rent paid ABOVE the market rent. What is the mechanism for either exercising or declineing the option?

Get professional advise!

My family has several rental properties in a couple states, for them, they simply want to be sure the mortgage (and taxes and insurance of course) is covered and look for about a 10-20 percent mark up if possible. Out of state they use a managment property to lessen the burden.

With comparable rentals being so far out, its going to be a bit subjective, is it a rural area? A good real estate agent should be educated enough on these to advise you appropriately and have the tools to do the nessecery Comparative Market Anaylsis.

As far as Rent to own, this is a great idea as long as the contract is written correctly to protect you, often owners will carry a note, which effectively makes you the lender without actual having to come up with cash. You keep the mortgage and write a contract for deed with a contract. For example, your rate is 6% you charge 8 percent and keep the yield, these can be written different ways with or without an owner held note. Either way be sure that the contract for deed, is written to the effect that you remain on title and thus owner until the loan is paid (if you are carrying the note), or if rent to own then you can do a lease option with the option of the renter to buy the house at market value in 1 yr, 2 yrs or whatever is best for you. Be sure title is not transferred prior to actual sale, or if owner held note, until you are paid in full effectifely paying off the mortgage, for example you carry at 8 percent, a bank qualifies them for 7 percent and the pay you off. Again, a good realtor should be well versed in this, the standard fee is 1% or can negotiate a set figure.

Any statement (or even inference) that there is any such thing as a "standard fee" is not only irresponsible and WRONG, it is highly illegal.

In addition applying "standard" formulas, or anyone else's formulas to your own situation, will not reflect local markets or individual needs.

328,

You absolutely need to have a professional well versed in lease to purchase agreements from your market... yes, many people structure these deals on their own, but only after much experience in doing so.

Whoever you are talking to represent you, make sure they have done several of these transactions and don't hem and haw when you ask them questions.

Anything is possible, but as we all know this market can create desperate scenarios of people needing to cover their mortgage - just be sure to take your time and know that an extra few weeks to find the right/best representative will pay off in spades down the road. Cover your behind.

Good luck to you!

prepare strong research in your case... as you need it right at the movment

What you're referring to is a lease/option arrangement. Two separate contracts, each stands alone. Might refer to one another.

Get a non-refundable option fee - $10K or more on a $200K home. Option to purchase at a price negotiated prior to start of rental period. Put a definite end date on option - ie 1 yr or 2 yrs. If they don't exercise the option you can choose to extend if you like... or not (and they forfeit the option fee)

Given your objectives, if you cover your costs you should be good. You may have an issue getting another loan - talk with your lender.

Check out rentometer.com for rentals in your area. Even if they're 5 miles away it should give you an idea. Then advertise in Craigslist. every day (keep it on top)

Good luck