Rent to Own Homes Secrets

Using a rent to own homes model for your rental property investment is going to get rid of most of the headaches that landlords typically complain of.

Tenant buyers are willing to pay your a premium in monthly rent, take care of most maintenance and pay a premium on the sales price of your property.

That's because they are "motivated buyers". This is akin to buying property from motivated sellers but from the other side.

This is how I structure my rent to own homes concept:

• I price my rental income about 20%-30% above local market rents


• I price my property about 10% above current sales comparables


• Tenants sign a 1 or 2 year lease with one month refundable security deposit


• Tenants sign an option agreement that gives them exclusive right to purchase the property - the option amount I charge is approximately 1.5 months rent and is non-refundable


• The tenants agree to make any repairs to the house below $200


• I give tenants a large rent credit if they pay their rent on or before the first day of the month. I'm very strict about this.

I have found that free advertising works best for me. Paying a print newspaper does not bring me much in the way of prospects. Craigslist provides free real estate classifieds, but a "Rent to Own" sign placed in front of the property with my Evoice number on a sign works best. I also use a few RTO arrow signs placed on busy roads with the property address. These signs bring me hundreds of calls.

I record a script on my voicemail box with a description of the property the terms and make sure to highlight the rent credit I offer. When I call back prospects, I try to determine if the down payment and rent are something they can handle. I also let them know that lots of people are calling and that they are not the only ones I will show the property to.

Typically I schedule one time to show as many people the property as possible. That way I don't waste my time hoping someone will show up. When prospective tenants see others looking at the property they have a much greater sense of urgency.

Screening your prospective rent to own tenants is critical. I verify their employment, talk to their current landlord and drive by the place they live. I also like to get an idea of their current debt situation.

Most of these tenants have a hardship story so I don't disqualify them for their poor credit. Getting a bad tenant out is no fun, so do your homework. If a tenant-buyer does not have all the cash or wants to pay the option in payments I do not accept them. Make sure you get all of the security deposit and option money up front. I also let prospects know that the first one that gets the funds into my hands gets the property.

One of the keys to success is having your tenant-buyer improve their credit score. I have a relationship with a mortgage broker and refer all my tenants to him.

It is possible to improve a tenants credit score and the broker can give them a realistic plan for what to do. The broker in your State will also know how you need to write up the sales contract if your tenant does exercise their purchase option.

If you purchased your rent to own home so that your PITI is below the local market rent and you are able to charge a 25% premium you will have a property that cash flows - a wonderful thing!

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