I have been trying to sell my rental condo and have been proposed a rent to own arrangement. The tenant/buyer would put down a non refundable deposit of about 20K and then rent the condo for 16 months and then have the option to exercise the purchase of the property or forfeit the 20K deposit. Just wondering if anyone has experience with this type of deal. Thanks.
Some. I'd definitely hire a real estate lawyer to do the contract if you go that route. As long as the terms are in your favor and you can float the mortgage, I don't really see how you can lose. If they leave, you made $20k on top of any additional rents and you still have a property to sell. Some things to consider would be:
-Charging fair market rent. You'll want the monthly price to be at market rent, not just enough to cover your expenses. Have you researched what other condos are renting for? How does that compare to your monthly costs?
-16 months is a very specific time frame. Are they expecting to come into some money at that time? Don't be afraid to ask personal questions - this is more than a rental application
-Will a percentage of their rent go toward "principal" every month? This is common for owner financed deals, and sometimes for lease options as well
-What happens if they decide to exercise the purchase option and can't get financed? Have a clause that defines that situation
thanks. all good points. rent would be on the high end of what is normal around here. Apparently the buyer is expecting some type of financial windfall in 16 months according to my real estate agent. I think the rent would be rent only and I would not plan on having any of it go toward principal. I would imagine that if they can't get financing they wouldn't be able to exercise the purchase option, but good idea to have a real estate attorney review it.