|
by Charles W.
Moore
Rent to
Own is a creative selling strategy that
allows you
to rent and sell an item or property quickly and
receive
three income streams. Rent to Own has many
names: "Lease
Option", "Lease Purchase", and "Lease with
Option to Buy",
to name a few.
The use of the Rent To Own strategy has
been around for a
long time. Have you ever heard of RAC (Rent A
Center)?
It's a business that allows customers with bad
or no credit,
to rent New Brand Name electronics or furniture
with the
option to own it in a year or two as long as
they make their
payments on time and take care of it.
We'll use a Big Screen TV as an Example: The
customer puts
down a small payment, pays a monthly payment,
and at the end
of a year or two they have the option to pay off
the Big
Screen TV or return it back to store. Most
people that have
had that Big Screen TV in their house for the
last year
want to keep it. The best part is that the buyer
will pay
more than what the equipment or furniture is
worth because
RAC is taking a chance on them. RAC is trusting
they will
take care of the Big Screen TV and either buy it
or return
it in good condition.
Apply
it to Real Estate, the buyers are for
Rent To Own
Properties. They are people with
less then perfect credit,
people who are self employed or maybe just
people who want
to try owning a house before they actually
buy it.
These people may not be able to qualify for
a mortgage now,
but over the next year or two you help them
clean up their
credit in order to become homeowners.
They are called Tenant Buyers (T/B). The
reason they are
called Tenant Buyers is because you have
them sign a rental
contract as a tenant and a separate Option
to Purchase
contract that will make them a buyer in the
next 12 to 24
months. (An Option gives the Tenant Buyer
the Exclusive
Right to Purchase but not the Obligation).
The real benefit
is that you create three income streams for
the property.
Let me explain:
1. Market your Property "Rent To Own." When
you find a
Tenant Buyer, you collect 3% to 5% "up-front
money" called a
Non-Refundable Option Payment, which you
record on your
"Option to Purchase Contract."
2. They sign a Standard Rental Agreement for
1 to 2 years,
giving you a monthly cash flow, typically
around $125 to
$250 or more. However, it can be much more.
It could be
several hundred dollars depending on what
the Market Rents
are and what you can negotiate with the
Tenant Buyer.
3. When the Tenant Buyer exercises their
Option to purchase
the house, at the price you had agreed on
when the original
contract was signed, you can make anywhere
from $10,000 to
$30,000.
Profits Explanation: Let's say you're doing
a 60-Month
sandwich lease option from a Motivated
Seller for a $10 Non-
Refundable Option Payment. The Motivated
Seller owes
$75,000 with a Monthly Payment of $750. (P.I.T.I.)
Note:
You do
not need to do a sandwich lease - you can
use the Rent To
Own Strategy to sell any property you own or
control.
You collect from the Tenant Buyer a $3,500
up front Non-
Refundable Option Payment (You subtract it
from the purchase
price) plus $200 a month, monthly cash flow
(No Rent
Credits) and a $95,000 selling price.
You make the following from the spreads over
two years:
1.Rent: $200 x 24 = $4,800
2.Price: 20,000 (minus closing costs)
3.Up front: $3,500
--------------------------------------------------------
Total Profits: $28,300
Note: If you negotiate 4 deals a year,
you'll make over
$110,000 from your investments in the next
12 to 24 months
without all the maintenance headaches of
being a landlord.
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
|
|
