Is Rent-to-Own a good idea?
I decided to sell my rental property this year. My tenants would like to buy it but just haven't saved enough for the down payment. I don't blame them; the house is worth at least $785,000 - $800,000. It's in the California Bay Area. A 20% down payment would be $157,000. Anything less, and they'll have PMI and a $4000+ mortgage too. They are currently paying $2400 per month in rent.
They are interested in a rent to own situation to help build that down payment. We may be able to add $1000 per month to the rent, that can count towards that down payment (and get them used to that high mortgage cost). However, is it worth it for me to do this?
I would love to sell it to them. I’ll also save on real estate agent fees ~$47k+, and they’ll continue to pay down my mortgage until they can buy. But if we agree on a purchase price now, and I hold out (maybe a couple years) for them, am I short-changing myself in the long run? If we decide to pay fair market price when the term is up, but the market goes down, i wouldn’t want that either.
Thanks for your advice in advance.
P.S. - I owe $280k left on the mortgage if that helps with the numbers. I refinanced in 2017.