BiggerPockets

Make sure you have the correct paperwork. You will need an option agreement that gives the tenant the option to buy the house and then you will need the regular rental agreement.

It is up to you if you want some of the rent to go towards the purchase price. I usually do $300 a month in rent credits for my tenant/buyers.

Wheatie

You look like a kung fu master. Maby that is why you have such a Real Estate Zen about you. Thanks for the good info again.

As far as price I am waiting on the aprasial but I think it will be around 60,000. So where do i get a good option contract? Does anyone have one that they could email me?

Thanks Travis

We have contracts for over here (in Australia) but they do vary slightly from State to State - possibly the same in the US, but your legal people should be able to advise on that.

You can get access to US standard option contracts, again that may need to be modified to suit your deal, as part of the package available at my website. It may be a cheaper option than getting an option contract specially drawn up by your own people.

Perhaps also talk to various legal people in your area that have done these deals before. It is important that they know how to make the paperwork fly or else you could get yourself into hot water!

As Wheatie said, you must keep the standard residential lease completely seperate from the option, and also take as much as you can up front as an option fee. Money on the table from the buyer helps to ensure that they stay in the deal to the option date!

A lease option is usually a combination of a lease and an option-to-purchase, both of which run for a specific length of time. I like Andy Heller and Scott Frank's material on this topic. In their approach, they agree with the tenant buyer on a purchase price up front. If the tenant buyer chooses to exercise the option, they will get their own financing and pay you off. If they choose not to, but don't want to move out at the end of the option period, you renegotiate and extend the lease and option or write new ones.

So, yes, it could go for a long time. But, it could also get terminated for any of the reasons a lease usually gets terminated. Not paying rent, illegal activity, whatever. You would write the option to refer to the lease and state that if the lease was terminated for any reason that the option was also terminated with no refund of any option payments. In theory, that gives them an incentive to keep up on the rent and take care of the property. In reality, who knows.

Heller & Frank's course has forms with it.

Thanks for that compliment.

Has your tenant buyer been prescreened by a mortgage broker to see if she can qaulify for a mortgage for your asking price and also how far out she is from getting qualified?

I suggest that you do that with all of your RTO tenant buyers. That's a requirement I have with everyone on my buyers list. Anyone who wants to take a house has to be prescreened first or I won't let them take it. Follow up with guidance emails on credit repair and debt management and add in affiliate links to monetize off the list.

As far as a monthly rent credit... I agree to keep it low on a $450.00 a month rent.... nothing more than $100.00 that's applied to the purchase price on the back end ONLY if they excercise their option to purchase. It never comes off the upfront rent money. Make sure to inform them that if they don't excercise their option to purchase the house, then they lose the option money and the rent credits because they are non-refundable.

Best regards,

Never heard of a rent to buy option - what are the advantages of that as oppose to just selling or renting?

Selling on a lease option A.K.A. rent to own is my favorite way to sell property. You will get high quality tenants because they are in the homeowners mindset since they will eventually own the house.