Rent Credits on rent to own deal

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Rent Credits on rent to own deal

George Smith
Investor · Latham, NY · Member since 2014 · 217 posts · 65 votes

Good afternoon,

Is anyone currently doing rent to own? I've got a question on the difference between what you pay the seller in rent and what you collect from the tenant buyer. I inquired with another investor in the area and he said that the bank does not see the rent credit(additional rent paid over market value) as part of the down payment when the tenant buyer goes to finance. I'm assuming this wouldn't apply to anything provided that there is no rent credit offered and I'm collecting the difference between the rental amounts? Has anyone dealt with this?

He told me that it was recommended to him to structure it with a land contract which involves him borrowing private money and then refinancing.

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y

    I read this 5 times before the headache I was getting made me stop.

    First, NEVER give rent credits, or Option Consideration Credits unless you want your Lease Option to be declared a Land Contract and have all of the rent and Option Consideration Money credited towards the purchase...as in a Land Contract.

    Second, please run through this again with an example using number$ with Dollar signs in front, so I can figure out an answer to your question...or figure out exactly what you question is as it pertains to Lease Options

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    6y

    @George Smith

    As noted in other post, please explain with numbers and what your role is in this, you buyer, seller, lender ??

    It is as clear as mud

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  • George Smith
    OP
    Investor · Latham, NY · Member since 2014 · 217 posts · 65 votes
    6y

    Thank you for responding. I was looking to start marketing and finding sellers who may not have enough equity in their properties. I was trying to find out if there were any restrictions on the types of structuring I could do.

    I wasn't planning on offering rent credits but knew of it as a tool that could be used if another part of the deal would benefit me greater by using it.

    There was no deal with specific #'s. It was more so of a question about how banks would treat rent credits which joe helped clear up by saying...don't do it ever....lol.

    I appreciate you're responses.

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