Rent to Own Properties for Today’s Changing Market

As an investor, you have an arsenal of options available when it comes to your real estate investing strategy. You will be wise to consider several before deciding which best fits your current and future needs. There are several variables that go into your decision:

• Investment funds you have available or can raise?

• How much you want to make in profits?

• How much risk you want to take?

• How fast you want to pocket your profits?

Rent to Own Properties Can Be the Best of All Worlds

Rent to own properties work well in all scenarios. Especially my favorite, the sandwich lease option. These are your opportunity to collect reliable monthly rent as a landlord without the hassle of making most of the repairs. Once the deal is in place it becomes a mostly passive income stream. Based on my decades of real estate investing experience, I’m firmly convinced that lease options are the least risky but highly profitable niche for investors.

You want buyers to treat rent to own properties almost as a purchase agreement. Although they are renting, the intention of purchasing is very real. Probable buyers should have an inspection done before signing the contract. Then the buyer needs to take the step of working with a mortgage professional to develop a plan enabling him/her to qualify for a mortgage before the option period expires. This creates the mindset of buying the home. The tenant/buyer takes better care of the home. Your contract specifies they make and pay for most repairs, which saves you the time and money that typical landlords anguish over. At the same time, you collect a higher than market rent with the full expectation of a big profit when the sale closes in a year or two. This is the best of both worlds. The third best world with rent to own properties is the house is appreciating in value all of the time – even if this particular purchase isn’t completed.

Rent to Own Properties is a Solid All Around Strategy

Real estate markets change. They go through a well-known cycle. There are hot market conditions, normal markets, and cool or cold markets. Market conditions don’t change overnight but there are leading indicators. We’ve enjoyed the current hot market since about 2012. This was a sellers’ and landlords’ market. Landlords enjoyed ever-increasing rents. Rent to own investors did also. Rehab flippers enjoyed ever-increasing sales prices. Rent to own investors did also. Today, rent to own properties will continue flourishing as the market moves from hot to normal and will continue prospering even when the market eventually cools off.

Something good for buyers (and rent to own investors) is that most of the foreclosures, short sales, job losses, and other credit alignments from past years are now deleted from credit reports. But that doesn’t make it clear sailing for many homebuyers. As the mortgage market changes, interest rates have been rising for at least a year. Just as important (as a result of past credit troubles) banks are now requiring people to have better credit and longer employment histories than in past years. Rent to own properties will continue thriving in this environment while other investment strategies begin struggling.

Why Rent to Own Properties Will Continue to Prosper

The buyer’s credit score and down payment will benefit in the evolving real estate market. Rent to own properties provide a built-in mechanism to help people rebuild their credit by making timely rental payments during the contract period. This increases the likelihood that they’ll be approved for a mortgage to buy the home a few years down the road. The lease option fee applies to the down payment. Even if that isn’t enough for the full down payment, the buyer now has time and incentive to save the remainder during the option period. At the same time, sandwich lease options continue being favored by investors…

You don’t own it, no one can sue you for it, no one can put a lien against it, this is low risk investing. Your expenses are minimal because the tenant-buyer pays for repairs and maintenance. You pay a small “option fee” for control rather than a hefty down payment. That makes it low cost. Exactly what you’re looking for is a low risk and low cost investment property.

Whom is lease option investing suited for? The short answer is any investor. Beginning investors that are cash poor find it particularly appealing. As does the experienced investor that has maxed out his/her ability to obtain new financing. Also, every investor in between. Real estate investing is about “controlling” as many properties as you can. It is NOT about “owning” as many properties as you can. This makes rent to own properties ideal.

By Wendy Patton

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