Info Re: Rent-To-Own Real Estate

[luvmylab]

Hi there,



This is my first post here, I was directed to this website by a realtor and was hoping to get some information from the knowledgeable members here.



I have a condo that I am looking to sell and was contacted by an investor. I didn't get into details with him on the phone, I would rather talk about it in person seeing how I don't know anything about these types of deals. However, he briefly mentioned that he and his partner have rent-to-own "buyers" lined up for properties that they find. They would rent the property for a period of time and then the selling price is paid out to us at that time.



As I mentioned, I know nothing about this type of thing and was hoping that I could get some clarification from the members here. We are meeting with him on Thursday, but I feel apprehensive to provide him with detailed financial information in not being fully informed. Is this a common thing occurring in real estate these days, and is there anything I should be concerned about or aware of?



Thank you!

 

[GaryMcGowan]

You can visit our web site to learn about Rent To Own, www.renttobuyahome.com



Rent To Own can be a few different things.

> An Investor will buy a property and place a mortgage on it. Then they will lease it to the client and credit up to 20% of the lease payment back to the client when they exercise the option to purchase

or

> An Investor will look to lease(or pay for) a property and "sub-lease" it to a RTO client. The Investor and the owner will have negotiated a future purchase price. The Investor will also have negotiated future purchase price with the RTO Client. The Investor makes the spread in the middle. The same applies with the monthly payments.



The benefits to RTO as an Owner or Investor are:

The clients place deposit up front to live in the house. Anywhere from $5,000 to $15,000 (usually 3% of today's fair market price)

The clients are typically responsible for all the maintenance and repairs

The clients are very motivated to pay on time (if they do not they can lose they credits and deposit)

Vacancy is "almost" eliminated" (we have to expect the worst, conservatively speaking)



The most important thing when it comes to RTO is to have the proper paper work and Independent Legal Advice.



If I was the investor looking at your condo I would want to ask you "Why are you selling?". Then I would work from there.

 

[luvmylab]

Thank you so much for sharing your knowledge, I truly appreciate it and I will most certainly check out your website. Your response does give me some more insight into this option. Something else I should ask is, are there any "red flags" that I should be looking for when we meet with this individual?

 

[Thomas Beyer]

[quote user=luvmylab]Is this a common thing occurring in real estate these days, and is there anything I should be concerned about or aware of?


It is not very common. But it can be done by an informed investor.



Hence, you as a seller, need to ensure that this "investor" actually knows what he is doing. Many folks love to buy real estate with no money down and be Donald Trump with no money and little work. Only very few actually achieve that.



So ask him:

a) how many tenant-buyers does he have in his network ?

b) are they qualified to pay a SUBSTANTIAL downpayment (say 12-20,000) AND are able to pay rent plus an credit that exceeds an average rent by about 30% ?

c) do they have legal paperwork that they can show you for

- purchase

- lease



Lease-to-own (or rent to own) is a great strategy if executed well, for both sellers, buyers and renters (future buyers). Ensure he/she can actually execute !!



If the venture goes sideways you have a lot to lose .. a lot more than the buyer/flipper: no or little money down, no income for months while still on the hook for the mortgage, and a house with substantial damage ! The risk is real. Ensure the person can explain to you how she/he is mitigating this risk to you !

 

[bizaro86]

[quote user=ThomasBeyer]Hence, you as a seller, need to ensure that this "investor" actually knows what he is doing


Indeed. To add to the list of questions, I would ask how many of these deals has this investor seen all the way through, to the point where the tenant-buyer either bought the house or walked away. If the answer is zero, I wouldn't even consider it, since you'd probably be better off finding someone yourself.





Regards,



Michael

 

[markl]

Your security is the person your leasing to. I would want to know how much of a down payment they will be providing and how much above market rent they would like to pay you for having the option to purchase your property.



At the end of the day all this is you have a person leasing your unit and they have an option not an obligation to purchase it in a number of years. All deposits would be non-refundable and you should take into consideration the future value of the property.



Ensure the contracts have been reviewed by a lawyer and the biggest thing is are you comfortable having someone else make the decision on who will be living in your suite. If you want you can pick up a copy of my book "Investing in Rent-To-Own properties a complete Canadian Guide" at your local chapters or indigo and you can learn more about RTO.



Regards,

 

[luvmylab]

Thank you all so much for sharing your personal knowledge with me. All of your replies have helped me to learn more about this type of deal and I now know what types of questions I should be asking when I meet with this individual.

 

[finddave]

Hello luvmylab,



I think you should rent your own property.

I also like it, because there are many benefits of renting...



First you can easily cover up you mortgage EMI.

Second that security of your home by Tenant.

Third one is maintenance of your home.

And many other reasons that you should rent to your own home.



You can prefer to contact Dave at FindMeAPlaceToRent: Condos, Townhouses for Rent in Toronto