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by Charles W.
Moore
The
rent-to-own strategy is one of the
easiest ways for a creative real estate investor
to profit from today’s housing market. In a
society where not everyone maintains solid
credit, such opportunities benefit both the
investor and the tenant-buyer.
In real estate, one of the best ways to make
money as a creative real estate investor is to
work with rent-to-own options. Doing so
can be a source of income from several
directions. First, you receive money up front
from your buyer, followed by monthly cash
income. Finally, the purchase price should
easily bring you a profit on the property. Best
of all, with this sort of real estate option,
your buyer will pay you more than the property
value for the home. It sounds too good to be
true, but evaluate exactly how a rent-to-own
option works.
Rent-to-own housing is a lot like leasing a car.
When you leave the dealership, you have made a
security payment on the vehicle (like a down
payment on a purchased car), and you have agreed
to make low monthly payments for a contracted
time period. At the end of that period, you have
an option to return the car to the dealership in
good condition or finance out the price of the
car and purchase it. In real estate, the
individual looking to purchase the home is
called a tenant-buyer because he or she is first
a tenant, renting the property for an
agreed-upon period of time, and later becomes
the potential buyer.
Tenant-buyers are typically individuals
with insufficient credit or circumstances to
qualify for a mortgage loan and still
considering purchasing a home. Through a
rent-to-own option, they can build their
credit and make sure they are prepared for
the responsibility of owning a home prior to
jumping into the deal, and you can benefit
from this decision. You will have two
separate contracts with a tenant buyer, and
you will receive money from them in three
different ways.
The initial contract will be a lease or
Standard Rental Agreement, with the
agreement to make certain payments for a
particular period of time. For example, a
two-year lease of $400 per month payments
would result in income for you of $9600. At
the same time, an Option to Purchase
contract would be completed that would
involve two parts. The first would be an
agreement to pay a Non-Refundable Option
Payment of 3-5% of the value of the home.
This is like a security deposit that takes
the house off the market and sets up the
home for the second part of the contract.
The second aspect of this contract is the
Exclusive Right to Purchase. This means
that, if the tenant pays the security
deposit, maintains the rental agreement, and
wishes to purchase the home at the end of
the rent-to-own contract, he or she has the
exclusive right to purchase the home without
you putting it on the market. However, the
individual is not obligated to do so, much
like someone who leases a car can simply
return it at the end of a contract. Usually,
however, the person will decide that they
don’t want to move and will obtain the
mortgage loan that will allow them to
purchase the home from you at the originally
agreed upon price, which is your third
source of income from the home.
In review, the rent-to-own process
can help tenant-buyers get into a house they
otherwise would not qualify for and also
help creative real estate investors to make
money in three ways. The tenant-buyer places
a deposit up front that is cash in your hand
and then continues to pay an agreed upon
amount for the terms of the rent-to-own
contract, creating monthly income for you.
At the end of the contract, the tenant-buyer
obtains the money to purchase the home from
you, at which time you are able to sell the
house for a profit.
ABOUT THE AUTHOR:
Charles
W. Moore is a U.S. Army Veteran who began
investing in Real Estate in 2001. He's a
Full-Time Investor, Webmaster, Speaker, and
Author of the book, "Million Dollar Rent To
Own Real Estate Secrets Exposed." Get a Free
Report on
Rent To Own Real Estate Investing from
Charles at:
http://www.Rent2OwnExposed.com and learn
more about Real Estate Investing, Investing
in Stocks and Internet Marketing by
visiting:
http://www.REIeBooks.com
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