Hello,

I have a client who can’t purchase a home right now due to issues with an ongoing divorce, but she needs to get a new place ASAP.

I am not too familiar with rent to own, but I thought that could be a solution for her while she resolve the papers issue. Could someone point me in the right direction, and/or put me in contact with someone who knows more about that potential solution ?

@Laurent P. You can go in this link for instructions so you have all the information. This link has information about rent credit for option to purchase.

B3-4.3-12, Rent Credit for Option to Purchase (04/01/2009)

I'll answer any question you might have.  Just PM me.  There's a lot of old school info that will just get you into trouble with the recent changes in lending laws.

Originally posted by @Joe Villeneuve :

I'll answer any question you might have.  Just PM me.  There's a lot of old school info that will just get you into trouble with the recent changes in lending laws.

Answer here so everyone can see 

 

Originally posted by @Laurent P. :

Hello,

I have a client who can’t purchase a home right now due to issues with an ongoing divorce, but she needs to get a new place ASAP.

I am not too familiar with rent to own, but I thought that could be a solution for her while she resolve the papers issue. Could someone point me in the right direction, and/or put me in contact with someone who knows more about that potential solution ?

I'd just have her rent until she can buy normally. RTO is full of scammer 'sellers' and needs to be done right.

LOs work best in low equity buyers markets. Now we are in neither.  I haven't been the Optionee on one since 2013. 

Purchase credits, Harjeet?  That's a no-no since DF and the safe act circa 2010. 

Learning the proper 2 separate docs approach is fine, but stay away from shady RTO deals on Craigslist.

@Joe Villenueve knows what he's talking about. 

@Steve Vaughan

I’m sorry, “LO” means?

Originally posted by @Laurent P. :

@Steve Vaughan

I’m sorry, “LO” means?

It means you should advise your client to wait and buy normally.

Lease Option

 

Originally posted by @Ari Hadar :

Originally posted by @Joe Villeneuve:

I'll answer any question you might have.  Just PM me.  There's a lot of old school info that will just get you into trouble with the recent changes in lending laws.

Answer here so everyone can see 

 

I have...many times.  Just do a search for LO and my name.

Here are some highlights:

1 - The Lease Option strategy is not a single contract.  There are two contracts involved:  The Lease AGreement and the Option Agreement.  Never mention the "other" contract in either contract.

2 - There should be no credits given.  This would tie the two contracts together, and as the seller, you don't want that to happen.

3 - The Option Consideration is the entire cost of the Option Agreement and in no way should be used, al or in part, as any form of Down Payment.  The Option Consideration buys the Option Contract...that's it...and is NOT refundable.

4 - A third Contract, the standard Purchase Agreement, happens when/if the Option Agreement is exercised.

5 - The Property in question should never need any rehab.  Why would someone do rehab on a property they don't now, and may never, own? 

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

Originally posted by @Dennis Wayne :

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

Originally posted by @Joe Villeneuve :

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

I agree with everything you mentioned but it’s typically one sided in a transaction in the sellers favor . You are right though in some cases it can make sense for the buyer . It allows them to “ try” the house out and locks in a fixed price . I love lease options myself but I structure them to my benefit and most of the time it is probably not a good idea to buy this way especially if you have a good job good credit and a reasonable chance of conventional financing I’d rather a person wait and buy outright 

 

Originally posted by @Dennis Wayne :

Originally posted by @Joe Villeneuve:

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

I agree with everything you mentioned but it’s typically one sided in a transaction in the sellers favor . You are right though in some cases it can make sense for the buyer . It allows them to “ try” the house out and locks in a fixed price . I love lease options myself but I structure them to my benefit and most of the time it is probably not a good idea to buy this way especially if you have a good job good credit and a reasonable chance of conventional financing I’d rather a person wait and buy outright 

 

It's a very good option for a buyer, and an investor both selling and buying. The Sandwich LO where the investor is both is best.

It's not for everyone though, but it's also not just for the seller's advantage.

 

Originally posted by @Joe Villeneuve :

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

I agree for yourself, probably @Dennis Wayne and myself Joe, but not a rookie like agent Lauren or his client.  Too many sharks in the buy/optionee side waters. 

 

Rent to Own is usually a scam like the "Buy Here Pay Here" car lots.  It's a repossession game, not a sales game.

Check out Home Partners of America. It's a Lease Option program where the investor group vets the tenant, then lets them pick a home on the MLS and then buys it for them. Then they give a lease option for the next 3-5 years.

They do have requirements, though.  If the tenant has crappy credit, they won't qualify for this, either.  It's best to hook them up with a legit advisor that can tell them how to improve and put themselves into a position to buy.

Originally posted by @Steve Vaughan :

Originally posted by @Joe Villeneuve:

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

I agree for yourself, probably @Dennis Wayne and myself Joe, but not a rookie like agent Lauren or his client.  Too many sharks in the buy/optionee side waters. 

 

Not so sure, but it's not right for everyone, and like any other strategy, doesn't work for every deal

Home Partners of America is an option I use for my buyers who can't get approved.  It's a lease with the option to buy program.  

Originally posted by @Joe Villeneuve :

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

 Best explanation i've heard about the LO optionee... Why is it so good for the investor and how does he make the deal? 

Originally posted by @Ari Hadar :

Originally posted by @Joe Villeneuve:

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

 Best explanation i've heard about the LO optionee... Why is it so good for the investor and how does he make the deal? 

That's a long explanation. The Sandwich LO is where the big money is for the REI. I'll give you the highlights:

1 - The cost to get control of a property is minimal, and if you do it right, you should recover those costs almost immediately
2 - ...which means that cash can be reused quickly, and over and over again.
3 - There are 3 spreads where the profits come from - 
   a - Rent money
   b - Option Consideration
   c - When the Option agreement is executed and the sale made

If your buyer has a reasonable amount to put down as in 10% at a minimum there are people like our company that owner finance properties and actually puts the deed in the buyers name. Of course this might not work for your buyer if the divorce is not finalized as of yet. 

Originally posted by @Dan Maciejewski :

Rent to Own is usually a scam like the "Buy Here Pay Here" car lots.  It's a repossession game, not a sales game.

Check out Home Partners of America. It's a Lease Option program where the investor group vets the tenant, then lets them pick a home on the MLS and then buys it for them. Then they give a lease option for the next 3-5 years.

They do have requirements, though.  If the tenant has crappy credit, they won't qualify for this, either.  It's best to hook them up with a legit advisor that can tell them how to improve and put themselves into a position to buy.

 A scam? No...not hardly. Can it be? Sure. So can any real estate deal. It's not a scam just because it's a LO.

Originally posted by @Joe Villeneuve :

Originally posted by @Ari Hadar:

Originally posted by @Joe Villeneuve:

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

 Best explanation i've heard about the LO optionee... Why is it so good for the investor and how does he make the deal? 

That's a long explanation. The Sandwich LO is where the big money is for the REI. I'll give you the highlights:

1 - The cost to get control of a property is minimal, and if you do it right, you should recover those costs almost immediately
2 - ...which means that cash can be reused quickly, and over and over again.
3 - There are 3 spreads where the profits come from - 
   a - Rent money
   b - Option Consideration
   c - When the Option agreement is executed and the sale made

How do you decide how much to charge for the option in the beginning, how much rent do you take more then market rent? What do you profit in the end if you set it 20 % above the option taking 2 years ago and the market rose by 30%?

 

Originally posted by @Joe Villeneuve :

Originally posted by @Dan Maciejewski:

Rent to Own is usually a scam like the "Buy Here Pay Here" car lots.  It's a repossession game, not a sales game.

Check out Home Partners of America. It's a Lease Option program where the investor group vets the tenant, then lets them pick a home on the MLS and then buys it for them. Then they give a lease option for the next 3-5 years.

They do have requirements, though.  If the tenant has crappy credit, they won't qualify for this, either.  It's best to hook them up with a legit advisor that can tell them how to improve and put themselves into a position to buy.

 A scam? No...not hardly. Can it be? Sure. So can any real estate deal. It's not a scam just because it's a LO.

 Not a lease option -- rent-to-own.  They are usually conflated. 

A true rent to own would have a down payment and a portion portion of your rent going towards principal.  Then, when you can't afford or miss a payment, you get the house repossessed.  

But, yes, usually people mean Lease Option when they say rent-to own.  That's why I described a Lease Option.

Originally posted by @Dan Maciejewski :

Originally posted by @Joe Villeneuve:

Originally posted by @Dan Maciejewski:

Rent to Own is usually a scam like the "Buy Here Pay Here" car lots.  It's a repossession game, not a sales game.

Check out Home Partners of America. It's a Lease Option program where the investor group vets the tenant, then lets them pick a home on the MLS and then buys it for them. Then they give a lease option for the next 3-5 years.

They do have requirements, though.  If the tenant has crappy credit, they won't qualify for this, either.  It's best to hook them up with a legit advisor that can tell them how to improve and put themselves into a position to buy.

 A scam? No...not hardly. Can it be? Sure. So can any real estate deal. It's not a scam just because it's a LO.

 Not a lease option -- rent-to-own.  They are usually conflated. 

A true rent to own would have a down payment and a portion portion of your rent going towards principal.  Then, when you can't afford or miss a payment, you get the house repossessed.  

But, yes, usually people mean Lease Option when they say rent-to own.  That's why I described a Lease Option.

 ...and, a rent to own is really a Land Contract in disguise.  With the new lending laws, the idea of "portion credits" have pretty much been eliminated.  A good lawyer (even a bad one) can turn "partial credits" into "full credits" without much work.  I don't even discuss Rent to own, and immediately turn any of those discussions over to LO for that reason...and I don't give any credits (formally) in LO's due to those same new lending laws.

Originally posted by @Ari Hadar :

Originally posted by @Joe Villeneuve:

Originally posted by @Ari Hadar:

Originally posted by @Joe Villeneuve:

Originally posted by @Dennis Wayne:

R2own is a great way to dump off problem homes but a bad way to buy them . Tell her to get her credit right then buy I’d have her rent in the meantime until life settles back down

 No, it's a great way to buy them based on specific reasons to want to use this way of buying. When you buy this way, you shouldn't be even looking at problem homes. I've used this method allot. As a buyer, you can hold a house while testing to see if you want to buy it. This includes anyone, including those who just got transferred for a new job and don't know the area. It works great for someone that works for a company that hired you based on a single contract, and if that contract extends, or if the employer likes your work, they will keep you on. Buying LO allows the "family" to tie up a house without committing to a long term mortgage.

These are just a few of the "non-credit issue" reasons why using LO to buy is great.

As an investor, it works even better.

 Best explanation i've heard about the LO optionee... Why is it so good for the investor and how does he make the deal? 

That's a long explanation. The Sandwich LO is where the big money is for the REI. I'll give you the highlights:

1 - The cost to get control of a property is minimal, and if you do it right, you should recover those costs almost immediately
2 - ...which means that cash can be reused quickly, and over and over again.
3 - There are 3 spreads where the profits come from - 
   a - Rent money
   b - Option Consideration
   c - When the Option agreement is executed and the sale made

How do you decide how much to charge for the option in the beginning, how much rent do you take more then market rent? What do you profit in the end if you set it 20 % above the option taking 2 years ago and the market rose by 30%?

 

 Everything is negotiable.  The market decides as well as the parties involved.

Originally posted by @Ari Hadar :

How do you decide how much to charge for the option in the beginning, how much rent do you take more then market rent? What do you profit in the end if you set it 20 % above the option taking 2 years ago and the market rose by 30%?

 

As @Joe Villeneuve says, it's negotiable and market-driven.

AFAIK, HPA that I mentioned above doesn't charge for the option fee, charges market rent during the option period, and pre-negotiates the sales price at the beginning of the lease.  They set it around 5% up per year.  So if the market appreciates like it has been, they "lose" out on making more money if the lessee takes the option. But they still profit from the transaction.