Adding Work Equity and Matching Deposits to RTO Tenant Buyer

[CarrieKoch]

Our tenants would like to RTO the house they are in. They would like to invest in the property by doing additional upgrades - flooring and bathroom. How can we compensate them for that so it either adds to their deposit or comes off the purchase price ?



Also we would like to match additional deposits. Is this allowable and how should we go about ?

 

[lanedry77]

Hi Carrie,



If they are dong the work and putting up the cost - isn't the reward to them the fact that they are increasing the value of the house? If you have a pre-determined option price for them, and they add value by upgrading, that increase in value becomes their equity when they buy it.



To me, that's their compensation.



As for an matching additional options, you cannot credit them money towards their down payment that they did not pay - the banks won't allow it.



You can, however, reduce the purchase price by however much you want.



for example; They pay you $1,000. you can (should) credit them that money towards their downpayment, but the banks won't allow more than $1,000 to be credited. You can then (also) reduce their purchase price by $500, $1000, $2000, etc... any number you want.





Thanks,



David.

 

[markl]

What David said