Selling Your Properties Via The Rent To Own Technique

By Author: zack
Total Articles: 8
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What is the Rent to Own or Lease Option Technique?

The rent to own technique and the lease option technique are one in the same. There is absolutely no difference in the two except the name. When using this technique you are simply leasing your property to an interested party and giving them the option to purchase the property from you sometime during the lease period. We call this interested party a tenant/buyer because they are a tenant today and hopefully a buyer down the road, Don't confuse option with obligation. When using this technique your tenant/buyer has no obligation to buy, but they do have the option of buying if they so desire.

In most cases you will use this exit strategy as a way of creating a premium priced sale in the very near future where it was not possible otherwise. The reason selling the property through conventional methods was probably not an option to you, or at least not an option at a premium price is because the types of properties that work best for this type of technique are properties located in areas that are predominantly tenant occupied. When selling properties at premium prices ...
... the conventional way you will want to stay in areas that are predominantly owner occupied therefore greatly reducing your buying areas.

When you have the Rent to Own technique as part of your real estate arsenal you now have the ability to buy in tenant occupied areas and still realize the same profits you would in owner occupied areas. Having this broad of a market to buy in greatly increases your chances of buying at greatly reduced prices on a more consistent basis.

Who is Your Target Market When Using This Strategy?

Your target market when selling properties on a rent to own agreement are hard working, honest people who for one reason or another have credit issues that are preventing them from obtaining a mortgage to buy a house the conventional way. Due to their credit issues they are willing to pay a premium to you in order to at least have a fighting chance of realizing their dream of homeownership. Another reason they are willing to pay a premium is the condition of the homes you will be offering on these creative terms. In most cases you will be offering creative terms [rent to own] on newly renovated homes. When screening a prospective tenant/buyer for one of your properties you want to look for the following criteria:

Steady Employment - They will need a steady job that pays a decent salary in order to eventually qualify for a mortgage to buy your property. Their debt to income ratio should not exceed 50%.

Active Checking Account - The best way to collect monthly payments from your tenant/buyer is by check. Collecting rents by check allows you to create a paper trail of on time rental payments which may come in handy when it comes time to get a mortgage for them. Having 24 months of on time rent payments, verified with cancelled checks goes a long way with a lender and may be the sole reason your tenant/buyer is approved.

Cash Reserves - You want to make sure they have enough money to satisfy your non refundable option deposit requirements plus any rent or pro rated rent that will be due at the time of move in.

Respectable credit, not flawless but respectable - All prospective tenant/buyers will have credit issues. It is your job to find the ones that have a chance of eventually cleaning their credit up and obtaining a mortgage to buy your house. We suggest you not consider anyone who owes more than $7,500 in collections. Also we do not suggest approving people who have collection accounts with past landlords or management companies. If they didn't pay their last landlord, what makes you any different? We also do not like to see more than $1,500 in back child support.

Zack Wiest is owner of PA Deals, LLC. They are a residential real estate investment firm located in Harrisburg, PA. Though founded in 2006, the principals of the company have been investing in real estate since the year 2000. You can find out more about PA Deals LLC Real Estate Investors at http://budurl.com/padealsbmpart