Rent/lease to own - GoFuckYourself.com

baddog · 07-31-2012, 10:33 AM

Anyone here done a rent to own/lease to own on a home as the seller? Care to share your experience?

beemk · 07-31-2012, 10:36 AM

If your intentions are to sell it to them then you would want to sell on a land contract. If they don't want to take the responsibility of the home then I would only rent to them.

TisMe · 07-31-2012, 10:43 AM

Get 4 - 7 months rent down and bump the normal rent rate by a few hundred per month.

My experience is that if they can't afford the upfront chunk they'll never make the balloon payment or be able to get financed.

You should be paid for tying up an asset.

baddog · 07-31-2012, 11:03 AM

Quote:

Originally Posted by TisMe

Get 4 - 7 months rent down and bump the normal rent rate by a few hundred per month.

My experience is that if they can't afford the upfront chunk they'll never make the balloon payment or be able to get financed.

You should be paid for tying up an asset.

I am leaning towards this, and to be honest, the only reason I am considering doing it at all is because the guy wants to rent for a couple years, then use his GI Bill.

beemk? A land contract?

beemk · 07-31-2012, 11:18 AM

Land contract is when you sell them a home and instead of them financing through a bank they finance through you. You charge a down payment and charge them whatever % interest you want.

TisMe · 07-31-2012, 11:28 AM

AKA contract for deed.

baddog · 07-31-2012, 11:34 AM

Quote:

Originally Posted by beemk

Land contract is when you sell them a home and instead of them financing through a bank they finance through you. You charge a down payment and charge them whatever % interest you want.

Ah, yeah I have had people ask if I'd be willing to do that but I am not sure I am ready for that kind of commitment.

PR_Glen · 07-31-2012, 11:40 AM

Quote:

Originally Posted by baddog

Ah, yeah I have had people ask if I'd be willing to do that but I am not sure I am ready for that kind of commitment.

why not leave it as a rental? I imagine it would bring in constant cash flow that isn't taxable if you do it right. If you sell it then you have to pay capital gains on it instead.

Wizzo · 07-31-2012, 11:45 AM

I did that with my 1st house and after 3 or 4 years they re-financed through a bank and I got paid in full with a few years of interest, so turned out better then if I would have just sold it outright.

baddog · 07-31-2012, 11:51 AM

Quote:

Originally Posted by PR_Glen

why not leave it as a rental? I imagine it would bring in constant cash flow that isn't taxable if you do it right. If you sell it then you have to pay capital gains on it instead.

It is not currently being rented.

Quote:

Originally Posted by Wizzo

I did that with my 1st house and after 3 or 4 years they re-financed through a bank and I got paid in full with a few years of interest, so turned out better then if I would have just sold it outright.

Thanks, I may hit you up on FB for more details.

PR_Glen · 07-31-2012, 11:56 AM

Quote:

Originally Posted by Wizzo

I did that with my 1st house and after 3 or 4 years they re-financed through a bank and I got paid in full with a few years of interest, so turned out better then if I would have just sold it outright.

did you have to pay gains on the rent to own deal?

SuckOnThis · 07-31-2012, 12:36 PM

Lease w/purchase options have a lot of benefits and I'm surprised more owners don't do it, maybe because they don't understand how it works.

Its a quick way to get a contract on a property, and usually at 5-10% higher price than you would normally get.

If the buyer/renter does not buy the property at the end of the lease, you not only get to keep their option deposit but also any option money added into the monthly rent.

The renter/buyer normally is responsible for maintaining the property and fixing anything that a landlord normally would handle.

I strongly suggest having a separate lease agreement and a purchase agreement. The reason is if you ever have to evict it is much harder for them to say they were purchasing the property which would force you to foreclose instead of evict.

PR_Glen · 07-31-2012, 12:41 PM

Quote:

Originally Posted by SuckOnThis

The renter/buyer normally is responsible for maintaining the property and fixing anything that a landlord normally would handle.

I strongly suggest having a separate lease agreement and a purchase agreement. The reason is if you ever have to evict it is much harder for them to say they were purchasing the property which would force you to foreclose instead of evict.

or you just don't buy a property that is falling apart and screen your tenants for credit, criminal and job confirmation and make them sign a lease.

No phone calls, repairs maybe once every 10 years or so? People doing this with 50 properties without a problem why can't everyone else with one?

SuckOnThis · 07-31-2012, 12:48 PM

Quote:

Originally Posted by PR_Glen

or you just don't buy a property that is falling apart and screen your tenants for credit, criminal and job confirmation and make them sign a lease.

No phone calls, repairs maybe once every 10 years or so? People doing this with 50 properties without a problem why can't everyone else with one?

People with good credit and backgrounds lose their jobs, get sick, etc. And if you think a repair every 10 years in any property is normal you obviously have never been a landlord.

JFK · 07-31-2012, 12:56 PM

Quote:

Originally Posted by SuckOnThis

People with good credit and backgrounds lose their jobs, get sick, etc. And if you think a repair every 10 years in any property is normal you obviously have never been a landlord.

every 10 years, yeah right, dream on

baddog · 07-31-2012, 01:02 PM

Quote:

Originally Posted by PR_Glen

or you just don't buy a property that is falling apart and screen your tenants for credit, criminal and job confirmation and make them sign a lease.

No phone calls, repairs maybe once every 10 years or so? People doing this with 50 properties without a problem why can't everyone else with one?

TisMe · 07-31-2012, 01:26 PM

Lloyd, offer your prospect a 1 year lease and after that do the contract for deed, lease/rent to own deal.

You'll see what he's like and he'll see if he really likes the house.

Offer to lock the sale price in now if he balks at this.

baddog · 07-31-2012, 02:19 PM

Quote:

Originally Posted by TisMe

Lloyd, offer your prospect a 1 year lease and after that do the contract for deed, lease/rent to own deal.

You'll see what he's like and he'll see if he really likes the house.

Offer to lock the sale price in now if he balks at this.

I've got to look over my loan docs to see if I can even do a land contract.

DTK · 07-31-2012, 02:23 PM

Quote:

Originally Posted by baddog

I've got to look over my loan docs to see if I can even do a land contract.

What you'll almost certainly see is that it can trigger a 'due on sale' clause. Not that it ever happens, but fyi.

rowan · 07-31-2012, 05:15 PM

If you're a real asshole you can structure the deal so that you act as a middleman, charging a few percent over what you pay the bank yourself, and include a clause that if they default you take back the property (forfeiting all additional funds above normal rent they've paid, and any equity...)

I know of some shady characters who have done this, they've "sold" the same property multiple times because the rent to own tenants eventually default. The kind of people who are interested in rent to own are likely to have problems getting a normal bank loan, so there's a much higher chance from day 1 that they'll default. Easy money for the scammers.

epitome · 07-31-2012, 05:29 PM

Quote:

Originally Posted by rowan

If you're a real asshole you can structure the deal so that you act as a middleman, charging a few percent over what you pay the bank yourself, and include a clause that if they default you take back the property (forfeiting all additional funds above normal rent they've paid, and any equity...)

I know of some shady characters who have done this, they've "sold" the same property multiple times because the rent to own tenants eventually default. The kind of people who are interested in rent to own are likely to have problems getting a normal bank loan, so there's a much higher chance from day 1 that they'll default. Easy money for the scammers.

How is it scamming if there is a clear contract and one party defaults? What one calls scamming another calls business.

slapass · 07-31-2012, 06:22 PM

depending on where you are or how you do the documents, you might be entering into a land contract in which case you would need to foreclose on them to get your place back. So an option is to separate the two transactions. Rent to them. Give them an option to buy. You will quickly see that giving them an option then makes zero sense. So an above market rent for two years and the option are separate but it is understood why the rent is higher.

baddog · 07-31-2012, 06:42 PM

Quote:

Originally Posted by rowan

If you're a real asshole you can structure the deal so that you act as a middleman, charging a few percent over what you pay the bank yourself, and include a clause that if they default you take back the property (forfeiting all additional funds above normal rent they've paid, and any equity...)

I know of some shady characters who have done this, they've "sold" the same property multiple times because the rent to own tenants eventually default. The kind of people who are interested in rent to own are likely to have problems getting a normal bank loan, so there's a much higher chance from day 1 that they'll default. Easy money for the scammers.

I'm sorry, I don't think you get it.

They want to rent from me, I don't want to rent to anyone. If I think they might buy it after a couple years then I would do it, but if they changed their mind then out they go. You think they should get a refund and live rent free?

keysync · 07-31-2012, 07:27 PM

I know a guy that has 23 properties he does the Lease with option route for legal reasons.
Lease is a lease. DON"T do land contract. That's harder to get them out if they stop paying.
A lease you give them an eviction notice and they're out.
He sets it up to take 10% or close to it as down payment.
Then charges around 8% interest and he carries the insurance on the property but the buyer needs renters insurance for their stuff.
So he pockets 10% up front and makes a few bucks per month on the payment.
If they stop paying evict them and sell it again.
There's big big money to be made doing this and people are right.
Do your background work. Don't lease your house to ANYONE you haven't done your background work on. People can really fuck up a house if you two get into a argument over them not paying and you telling them they're going to be evicted.
Generally though with 10% or so down people have some skin in the game so they're not likely to trash the place.
Good luck to you.
I plan to do this with my house in January.
It's listed with a realtor for 6 months. If he can't sell it I will go the lease route.

directfiesta · 07-31-2012, 07:55 PM

Quote:

Originally Posted by keysync

People can really fuck up a house if you two get into a argument over them not paying and you telling them they're going to be evicted.
.

check and recheck the possible tenants, add a clause of visit to check the upkeeping of the house ( but in fact it is not used as a " grow house " as this is a complete wipeout)

shake · 07-31-2012, 08:27 PM

Quote:

Originally Posted by epitome

How is it scamming if there is a clear contract and one party defaults? What one calls scamming another calls business.

I wouldn't say a scam, but a little shady.

epitome · 07-31-2012, 09:55 PM

Quote:

Originally Posted by shake

I wouldn't say a scam, but a little shady.

Nah, the owner entered the agreement in good faith and the tenants fucked it up. Is the place supposed to sit empty? Of course not. Is the owner supposed to change how he offers the property in the future? Of course not. They move on to the next person. If they don't fuck it up they end up buying the house... if they fuck it up they end up on the curb.

Also, there is risk to these agreements. Why not charge above the mortgage rate? Risk is supposed to come with reward. The owner is on the hook if the rent to buy people trash the place and abandon it so why shouldn't the owner make money for exposing himself to potential risk?

rowan · 07-31-2012, 10:16 PM

Quote:

Originally Posted by epitome

How is it scamming if there is a clear contract and one party defaults? What one calls scamming another calls business.

Because the model seems to be to attract buyers who are likely to default, when the penalties are a lot harsher than if they had a standard bank loan.

baddog · 07-31-2012, 10:22 PM

Quote:

Originally Posted by shake

I wouldn't say a scam, but a little shady.

Why is that?

Quote:

Originally Posted by rowan

Because the model seems to be to attract buyers who are likely to default, when the penalties are a lot harsher than if they had a standard bank loan.

Sheesh. You really think I would rather the guy not just buy the fucking thing? I am doing him a favor. I am trying to fathom what you have pictured in your mind, but it just is not happening. And what do you think a bank is going to do if you default? You are not getting ANYTHING back from them.

Not sure what harsher penalties you are thinking about. And people likely to default are likely to fuck up the place. Why would anyone want them?

epitome · 07-31-2012, 10:38 PM

Quote:

Originally Posted by rowan

Because the model seems to be to attract buyers who are likely to default, when the penalties are a lot harsher than if they had a standard bank loan.

The alternative is obtaining a standard bank loan. Oh wait, they've proven themselves too irresponsible for that. Even more reason to cover potential risk as they have a history of defaulting.

Or they can just do a normal rental and fix their credit.

rowan · 07-31-2012, 10:48 PM

Quote:

Originally Posted by baddog

Sheesh. You really think I would rather the guy not just buy the fucking thing? I am doing him a favor. I am trying to fathom what you have pictured in your mind, but it just is not happening. And what do you think a bank is going to do if you default? You are not getting ANYTHING back from them.

You seem to be taking this personally - I wasn't suggesting above that *you* were an asshole, or that you would even consider doing this. I was making comment about some of the bad things I've seen when it comes to rent-to-own deals.

epitome · 07-31-2012, 10:53 PM

Rent to own is usually targeted to people with bad credit and there is usually extra money to be made.

The people that successfully do rent to own will likely rave about it while those who bomb out will say its bad.

Just like with payday lenders. Those that use them responsibly will say they it got them out of a jam and they happily paid the high fees (especially if it avoided a bunch of bank overdraft fees). Those stuck in a perpetual loop will say they are horrible.

So should rent to own and payday lenders stop existing because people cannot use it responsibly?

baddog · 08-01-2012, 09:37 AM

So, last night I got another rent to own request.

Her: Is there a rental or lease-to-own option? I am very interested in this house!

Me: Possibly. How many people, ages, employment, referrals?

Her: There will be 2 as of now, however a family is in the near future. ages are 18 and 20. employment is Northcoast Distributing. and I am a student at Ivy Tech but will soon be getting a job.

~~~~~~~~~~~~~~~~~~~~~~~~~~~

How can this go wrong?

07-31-2012, 10:33 AM	#1
baddog So Fucking Banned Industry Role: Join Date: Apr 2001 Location: the beach, SoCal Posts: 107,090	Rent/lease to own Anyone here done a rent to own/lease to own on a home as the seller? Care to share your experience?

07-31-2012, 10:36 AM	#2
beemk CLICK HERE Industry Role: Join Date: Jan 2002 Posts: 20,829	If your intentions are to sell it to them then you would want to sell on a land contract. If they don't want to take the responsibility of the home then I would only rent to them. __________________ I host with Vacares

07-31-2012, 11:18 AM	#5
beemk CLICK HERE Industry Role: Join Date: Jan 2002 Posts: 20,829	Land contract is when you sell them a home and instead of them financing through a bank they finance through you. You charge a down payment and charge them whatever % interest you want. __________________ I host with Vacares

07-31-2012, 11:45 AM	#9
Wizzo 2011 GFY Hall of Fame! Industry Role: Join Date: Nov 2000 Location: Back in Texas! Posts: 15,226	I did that with my 1st house and after 3 or 4 years they re-financed through a bank and I got paid in full with a few years of interest, so turned out better then if I would have just sold it outright. __________________ Looking for Opportunity!

07-31-2012, 07:27 PM	#24
keysync Living the Dream Industry Role: Join Date: Sep 2011 Location: Murica Posts: 2,376	I know a guy that has 23 properties he does the Lease with option route for legal reasons. Lease is a lease. DON"T do land contract. That's harder to get them out if they stop paying. A lease you give them an eviction notice and they're out. He sets it up to take 10% or close to it as down payment. Then charges around 8% interest and he carries the insurance on the property but the buyer needs renters insurance for their stuff. So he pockets 10% up front and makes a few bucks per month on the payment. If they stop paying evict them and sell it again. There's big big money to be made doing this and people are right. Do your background work. Don't lease your house to ANYONE you haven't done your background work on. People can really fuck up a house if you two get into a argument over them not paying and you telling them they're going to be evicted. Generally though with 10% or so down people have some skin in the game so they're not likely to trash the place. Good luck to you. I plan to do this with my house in January. It's listed with a realtor for 6 months. If he can't sell it I will go the lease route. __________________

07-31-2012, 10:43 AM	#3
TisMe Confirmed User Join Date: Aug 2008 Posts: 1,719	Get 4 - 7 months rent down and bump the normal rent rate by a few hundred per month. My experience is that if they can't afford the upfront chunk they'll never make the balloon payment or be able to get financed. You should be paid for tying up an asset.

07-31-2012, 11:28 AM	#6
TisMe Confirmed User Join Date: Aug 2008 Posts: 1,719	AKA contract for deed.

07-31-2012, 12:36 PM	#12
SuckOnThis So Fucking Banned Join Date: Oct 2003 Location: In my head Posts: 6,844	Lease w/purchase options have a lot of benefits and I'm surprised more owners don't do it, maybe because they don't understand how it works. Its a quick way to get a contract on a property, and usually at 5-10% higher price than you would normally get. If the buyer/renter does not buy the property at the end of the lease, you not only get to keep their option deposit but also any option money added into the monthly rent. The renter/buyer normally is responsible for maintaining the property and fixing anything that a landlord normally would handle. I strongly suggest having a separate lease agreement and a purchase agreement. The reason is if you ever have to evict it is much harder for them to say they were purchasing the property which would force you to foreclose instead of evict.

07-31-2012, 01:26 PM	#17
TisMe Confirmed User Join Date: Aug 2008 Posts: 1,719	Lloyd, offer your prospect a 1 year lease and after that do the contract for deed, lease/rent to own deal. You'll see what he's like and he'll see if he really likes the house. Offer to lock the sale price in now if he balks at this.

07-31-2012, 05:15 PM	#20
rowan Too lazy to set a custom title Join Date: Mar 2002 Location: Australia Posts: 17,393	If you're a real asshole you can structure the deal so that you act as a middleman, charging a few percent over what you pay the bank yourself, and include a clause that if they default you take back the property (forfeiting all additional funds above normal rent they've paid, and any equity...) I know of some shady characters who have done this, they've "sold" the same property multiple times because the rent to own tenants eventually default. The kind of people who are interested in rent to own are likely to have problems getting a normal bank loan, so there's a much higher chance from day 1 that they'll default. Easy money for the scammers.

07-31-2012, 06:22 PM	#22
slapass Too lazy to set a custom title Join Date: Nov 2002 Location: Earth Posts: 14,627	depending on where you are or how you do the documents, you might be entering into a land contract in which case you would need to foreclose on them to get your place back. So an option is to separate the two transactions. Rent to them. Give them an option to buy. You will quickly see that giving them an option then makes zero sense. So an above market rent for two years and the option are separate but it is understood why the rent is higher.

07-31-2012, 10:53 PM	#32
epitome So Fucking Lame Industry Role: Join Date: Jun 2009 Location: St. Petersburg, FL Posts: 12,158	Rent to own is usually targeted to people with bad credit and there is usually extra money to be made. The people that successfully do rent to own will likely rave about it while those who bomb out will say its bad. Just like with payday lenders. Those that use them responsibly will say they it got them out of a jam and they happily paid the high fees (especially if it avoided a bunch of bank overdraft fees). Those stuck in a perpetual loop will say they are horrible. So should rent to own and payday lenders stop existing because people cannot use it responsibly?

08-01-2012, 09:37 AM	#33
baddog So Fucking Banned Industry Role: Join Date: Apr 2001 Location: the beach, SoCal Posts: 107,090	So, last night I got another rent to own request. Her: Is there a rental or lease-to-own option? I am very interested in this house! Me: Possibly. How many people, ages, employment, referrals? Her: There will be 2 as of now, however a family is in the near future. ages are 18 and 20. employment is Northcoast Distributing. and I am a student at Ivy Tech but will soon be getting a job. ~~~~~~~~~~~~~~~~~~~~~~~~~~~ How can this go wrong?