Rent to Own

Sounds great! I guess for tips - just to make sure you're comfortable with the numbers (sounds like you are). Also make sure the paperwork allows you to rent to own to someone else.

Good luck and keep us in the loop,

- Tom

I am assuming that the mortgage is staying in the sellers name. Have you called the mortgage company yourself to get the details on the mortgage? Get an Authorization to Release Info from the seller filled out and fax to the mortgage co. Make sure it is a fixed rate. What is the rate? Is the PITI all included in the payment? That everything is up to date. No early pay off penalty?

Separate from the mortgage co:
Make sure that you will be able to rent the prop to the TB for a higher rate than the full payment is to the mortgage co.

Make sure you use two separate contracts. One that is a rental contract and a totally separate Lease with Option to Buy contract. Do not mention the LO contract in the rental contract. Then, if the Tenant Buyer stops making payments, you only have to evict, not foreclose. Much cheaper and faster.

Make sure that you ALWAYS refer to the fee that your TB pays up front as an "Option Fee"!!! VERY, VERY important!!! NEVER refer to it as a down payment! Down payments would need to be refunded if they choose not to buy and in court could look as if they have equitable interest, which could trigger having to evict.

What is the length of time that you will have from the seller for the Option period?

How long will you option to the end buyer?

What will be the price that you sell to the end buyer? How did you come up with that price?

What is the going rental rate for same type prop in the area and what will your rent be to end buyer? Will you offer rent credit?

How much will you ask for an up front Option Fee?

OK, that's a good start...

Karen

Karen, there are a lot of pitfalls in completing a correct LO and especially a sandwich LO.

Who is going to fix up the property, you or your tenant buyer? If the tenant buyer is doing the repairs, what happens if he doesn't go through with the purchase? Will he be compensated for repairs he did?

All excellent advice above !! I love rent to owns and I can only speak for how I use a rent to own. The rto is different from the lease option and thus the contract is written and abided by differently. You can review each of them to see the differences. In my case and state I use a rent to own to buy and also to sell. You can include verbiage in the contract as long as it follows the law of your state. This is why it is common practice to have an attorney review anything you add or alter if you do not have experience with this subject. Karen has the exact concern you will want to investigate first. Make sure after getting the proper paperwork to get all info that what they are telling you and what is actually confirmed about the mortgage is Correct. ALSO I would do a preliminary title report make sure their are no existing liens or problems with the title. You can have a title company confirm this. When you make your payment to the mortgage holder then how will you be sure they are paying on the mortgage ? You may want to pay directly on the PRINCIPLE if you are paying MORE than what his/ her payment is. And you will want to pay directly to the bank so you KNOW this is getting to them. Karens advice on piti is also a concern. You need to make certain you know what when how and where things will be taking place. Have a detailed contract so all involved will have a win / win outcome. Good luck.
Jay

You want to make sure you get a the seller to sign a letter of intent with everything your planning to do with the lease option and you want to make sure you have the seller sign a memorandum contract then file it with the city/town, this would cloud the title of the property and keep the seller from refinancing, taking loans out or trying to sell to someone else. Karen gave you some good advice as well.