One of the more unique strategies when it comes to investment properties is the “rent to own” option (also known as “rent to buy” or “lease to own”). A rent to own deal works much in the same way as a standard car lease does. That is, you pay a specified amount of rent each month, and at the end of the term (usually 3 years or so) you have the option to buy. The monthly payments are typically split up such that the landlord gets an acceptable income, while at the same time a portion of the monthly payments are accrued toward the down payment that the tenant will need to eventually buy the home.
PROS AND CONS OF RENT TO OWN HOMES
Of course, like anything in life there are pros and cons of rent to own houses for both sides. One disadvantage is that rent to own homes are a little more complex than a standard tenancy agreement because there are more variables that need to be negotiated. Both parties must contractually agree on the monthly rent, the ultimate selling price, and the monthly option fee that the tenant will pay. Also, this process of locking-in the sale price presents a little extra risk for both parties, as the property value could rise or fall during the lease to own period irrespective of what is negotiated in the contract.
But generally speaking, the pros of rent to buy deals usually outweigh the cons. From the buyer’s perspective, rent to own homes offer the ability to save money for the down payment, and this type of deal also provides some time to allow his or her credit score to improve (if necessary). From the landlord’s perspective, the main benefit is that tenants will tend to take much better care of the property if their goal is to own it someday. Additionally, if the tenant walks away at the end of the term or the deal otherwise falls through somehow, the landlord gets to keep the previously accrued option fee payments.
HOW TO SHOW RENT TO OWN HOUSES
One of the most important parts of executing a rent to own deal is the initial property showing. Because tenants will generally be paying a premium for the lease to own option, you can expect them to be much pickier. Most people want the best home they can afford when looking to buy, and this same concept applies to rent to own scenarios. Thus, it is critical to put your proverbial best foot forward when showing these types of properties.
Immediately above is a video that demonstrates how to prepare lease to own homes to show to prospective tenants. Obviously the home should be fault-free and cosmetically appealing. So replace the flooring, paint the walls, make sure the appliances are acceptable, do some landscaping outside, make sure everything is spotless, etc. Then on the actual day of showings, the first thing you should do is make sure the temperature in the house is adequate for the time of year, turn on all the lights to brighten up the overall appearance, and open all the windows for a short period of time to get some fresh air into the house.
You’ll also want to act and dress somewhat professionally when conducting rent to own showings. No, you do not need a 3-piece suit but you should at least wear khaki pants and a button down shirt. It’s also a good idea to have a brochure or property stat sheet available for people to peruse, as well as some other basic documents like a rental application. Additionally, there should be a sign-in sheet for the prospective tenants so you can keep track of all the folks that stop by. Also, keep in mind that in most cases you would not need to do any staging, but it might be worthwhile if you are having trouble getting any takers.
So that is all there is to it. As you can see, the process of showing rent to own houses is very similar to showing a ‘regular’ rental property, but with a rent to buy scenario you’ll just need to go the extra mile to make sure the home looks perfect, as the people that would be interested in rent to own homes are always pickier than your average, everyday tenant.