Rent to Own

[legion]

Rob, have you had any rent-to-owns successfully complete the purchase?

Here are my thoughts:

1) Ask for 5% - 20% of the value of the house up front. This will be forfeit if the purchase is not completed. (I fully expect this to kill the deal right there. I think it's reasonable to assume that these people want to do a rent-to-own because their credit is not in good shape and they probably don't have any money saved.)

2) Run credit reports and do income verification on the applicants.
Charge an application fee.

3) Charge a rent above current market rates. This is to compensate me for taking the house off the market, and so that there is some money from the rent that is being used to build equity in the house. Any accumulated equity will be forfeit if the purchase is not completed.

4) Agree to a purchase price and a term up front. Don't make the term any longer than 3 years. The agreed-upon price should take into consideration the equity that has been "earned" through higher-than-normal rent payments and appreciation of the house over that time. Give the "renters" a year to complete the purchase.

5) Go into the agreement understanding that a purchase probably won't actually happen.

6) Refinance the house to minimize the monthly payment and pull out as much equity as possible. Hopefully this money + the money from #1 above approximates what I'd make in a normal sale.

[legion]

I just ran the numbers and the renter/buyer would have to bring $22,000 to the table so that I could purchase my next house with the same amount down as I could if I sold it outright.

I'm sure the potential renter/buyer probably won't have that kind of cash.

The way I look at it, is selling is a one-time headache. Renting is a continuous headache. Doing a rent-to-buy agreement with the expectation that I will have to put the house on the market again is a continuous headache that ends in a migraine.

I need to be compensated to want to take it on, and I don't want to have to make sacrifices to make it work because it's not something I particularly want to do.

[911Rob]

Sorry Legion, I was off on a binge of fun.
Yes, we've had renters go through with the contracts, more often than not.

I agree with your large deposit theory and also that it would be unlikely.

Company I work with takes $10,000 down. Then they have 3 different options for payments, the bigger the payment the higher the equity gained in the end.

Hope you sell your place soon and get into your new garage!
Cheers