Rent to own, good or bad decision?

Question

Just started renting out our first home after we bought a second and a potential tenant came up to me and asked me a question that I didn't see coming.  She asked me if there was an option to rent and eventually own the property.

I've heard of this proposal before on a few podcasts but truth be told know nothing about it.  Keep this conversation as broad strokes and don't feel the need to dive too deep in the details on specific terms but in general what are the more ideal situations where it makes sense to rent to own to someone else.

Truth be told I don't think is a route that we'll be going down, but it would be interesting to learn more about it.

Account Closed · Answer

@Nick Ferrari I'll chime in since that is the type of deal that I do. It can be good for the seller if the buyer is well funded, the transaction is done through escrow, you do "due diligence" on the buyer, the selling price is right, and it gets you moving onto whatever it is you want to do. Since there are detailed differences between Subject To, Wraps, Land Contracts, Lease Options, Owner Financing etc, I won't go into detail on any specific technique. But sure, it can work well for the Seller ** When Done Properly** . Usually the Seller saves the 6% or about $12,000 on a $200,000 house by using one of those techniques. Always close with an attorney.

Rob Lawrence · Answer

When researching this, I found that the mortgage company could technically consider your note due, and basically demand the entire note.  I guess they would have to find out, but it is a risk apparently from what I read.

Vince Mayer · Answer

@Nick Ferrari Do you want to sell the house in 1 to 3 years?