Rent to Own an Alligator Raeford, NC

7 Replies

I am new to real estate investing, but I have been renting a rental property since 2008 that does not produce a large amount of cash flow. Here is how it breaks down:

Yearly Gross Rent: $12,600
Mortgage/Ins/Tax: $9,816
Vacancy: $630
Repairs: $378
NOI: $1,776

Since I have owned the property for a while I have about $44k in equity. I also just paid $6,000 for new laminate flooring, which seemed to help me raise the rent monthly rent from $950 to $1,050 per month. I was thinking about trying to sell it rent to own. I figured this would do three things for me. First, I could potentially have a renter for three years with no vacancies. Second, I would not have to pay the property manager. Lastly, I would potentially not have to pay for repairs. My main question is this a good situation as is? Or should I try to sell it for a rent to own deal?

Thank for any advice in advance.

Troy

If you sold it where would you invest the money left over from the rental? The Raeford market is doing really well this year. Would be a good time to sell before interest rates start to climb up. Would you acquire better cash flowing rental properties with the proceeds from the sale? 

Brandon Purdeu, Real Estate Agent
(785) 717-8198

@Brandon Purdeu

Yes, I would use the money for another rental with better cash flow. I guess what I am really trying to figure out is if the amount that I bring in is enough to safely invest? I had the floors last years, so it was vacant for a few months and I had to put over $6,000 into the upgrade. I just really feel like it has been more of a liability than an asset, but I think I am very close to turning it into an asset. Thanks for the response! 

@William Ayres , just my personal opinion, but I'd sell and look for something closer to home or something with better cashflow and/or opportunity for real appreciation.  Preferably, something closer to home that also had better cash flow and appreciation.

At this point, you're holding that house basically with the paydown as your only means of profiting.  And as you're seeing, normal wear & tear repairs can make this a zero profit venture very easily.

Good luck,

Randy

@Randy E.

Thanks for the suggestion. So do you think I should pursue the rent to own? Or just sell it the standard way? I figure with the rent to own I could bring in $150-200 more without the cost of repairs; unless the occupants don't fix something and fail to purchase.

Troy

I clicked on this wanting to know all about the new business of lease-optioning alligators......;-).....was trying to figure out the angle....

@William Ayres , I'll say upfront that I have no experience with R2O.

My feeling is just sell it conventionally and be done with it.  Selling it R2O as you describe would lock you out of your next deal for up to 3 years.  Also, unless the buyer/tenant puts up a significant down payment, if they disappear after a year or two, you could still be left paying for repairs and updates for the next tenant/buyer -- which could eat up any profits you collected in the meantime. 

If you can sell and walk away with $40K+, I'd do that and buy something else that would produce better profits.

I’d have to agree with @William Ayres , there is additional liability with the rent to own option. Also consider the tenant class that is attracted to rent to own... generally the type of person that wants to buy but can’t qualify... 

I’ve never done rent to own personally, I have a few friends doing owner financing in the area and that works on the right types of properties, but not all. 

Brandon Purdeu, Real Estate Agent
(785) 717-8198

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