Updated over 6 years ago on . Most recent reply
rent to own properties
I was looking for some answers to the generalized subject of renting to own a property to a buyer. My two biggest questions are, is it legal to do this on a home that has a mortgage or line of credit attached to it? And two, is it common to ask for a large down payment, such as 10%-20% of the purchase price? And what is the recommended route to go to get this contract drawn up if I was to do this type of deal?
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#5 All Forums Contributor
- Plymouth, MI
The answers are not short ones. PM me if you are interested in the details.
The short version, based on your questions, is this:
1 - Yes it's legal. Why wouldn't it be?
2 - It's common to ask, but only a rookie buyer would ever give a large D.P....and it isn't a down payment...it's an Option Consideration, which is 100% of the cost of the Option to Buy Contract...which is separate from the lease agreement,...which is different (and also separate) from the Purchase Agreement.
3 - If you do this wrong, you can have the agreement(s) declared a Land Contract, and the Option Consideration as well as all of the lease payments could/would get credited to the purchase.
4 - Do this right, and this could/should be one of the best ways to buy (actually, control...which is much better) a property. Do it right, and you could/should have three sources of income, for very little cash out of pocket,...which you would use (the same cash) multiple times over a very short time period...never spending it,...no matter how hard you tried.