Oklahoma Lease to own

7 Replies

Hello BP guru's! We have a historic home that we've renovated as a flip and it hasn't been selling for over a year. Its a 4 bed, 3 bath in Historic Mesta Park in Oklahoma City. Main complaints have been no garage and a weird bedroom layout.  Its priced at $429k which is in range of many comps of the area. 

We have been approached by a couple to lease to own the property but we have no experience in this area.  I've read good option and purchase contracts are key along with a sizable down payment that would go toward the purchase price.  

Alas, I'm sure there are many other items to be aware of and we are seeking help from people with experience.  Some primary questions are, 1.) what price to rent for? (obviously enough to cover the mortgage/insurance/etc.)   2.) Should any of that rent go toward the purchase?  3.)How much of a down payment?  4.) How long should we allow for the lease before requiring purchase? 

Anyone out there that can help? 

There are several reasons why RTO may be an attractive way for an owner to consider. In some cases, the property has been sitting for a while, and a monthly mortgage + maintenance can be a burden. Also, RTO is a great solution for customers who do not have enough cash available for a down payment or access to credit for normal financing.

A typical RTO involves two agreements: a rental agreement and an option to purchase the property within an agreed-upon time frame which is typically 1 to 3 years after agreed-upon price. Through rent credits, a tenant can accumulate cash that goes toward the down payment. In addition, during the rental period, the tenant can save money above and beyond the rent credit to put toward the property. And, finally, a rent to own home gives tenants an opportunity to live in the home and get to know neighbors before committing to the purchase.

When I do an RTO, I contract the house at market price, this helps the RTO customer because in 2-3 years they can build equity in the property and use it as an advantage point to negotiate. Also, I won't take less than 20% down initially and I credit the entire amount towards the principle of the selling price – however, all monies are non-refundable. The rent should be reasonable market rent and should not be higher because of the RTO component of the deal. I have heard owners abuse this area just because it's an RTO and not a conventional way of purchasing real property, well that's wrong, and should not be tolerated. If for any reason, they decide to move out on the second year without a mortgage in place, they lose all the money. There are many other elements to consider, find a good RE layer that understands the laws in your state. I've many RTO deals and it should be structured as a win-win for both parties involved.

  • They are responsible for repairs and maintenance
  • They are responsible to position a mortgage within the 2-3 years
  • I provide a portion of the rent to go towards the down payment
  • They are responsible for Insurance

if things go south on a deal like that in okc just pray Judge Easter or Croy are not sitting the bench for the hearing.  i have seen things go south on a lease to own deal with them before. while i am sure some folks do fine on them always be prepared for worst case scenario as well.  

1) You can start a little higher and try to get a spread between what you pay out for the mortgage and what you collect from your buyer.  Then depending on activity reduce down to a breakeven until you get a buyer. 2) No 3) We typically do 3%-10% of the purchase price 4) However long the buyer needs to get their own loan.  We usually have them prescreened with @Paul Ritter and MyCreditTeam.com to find out how long it is going to take them to be mortgage ready.

If any of this resonates with you I can give you a few things to check out for free where you can probably get a lot of your questions answered.  Shoot me a private message as BP doesn't like me sharing right here.

Hope that helps,

Chris Pre


Sounds like you are already wise to this, but many investors avoid lease/rent to own contracts for many reasons (Oklahoma law being one of them). Structuring the deal as an option with a lease contract is more favorable to a owner/landlord, and the numbers can be finessed to operate the same as a lease to own. 

Thanks for all the input. We are investigating this possibility but its looking like a weak deal and we've had quite a few more showings over the past week so I'm going to remain hopeful those turn into an offer or two!  

If you decide to do that deal do NOT offer/provide rent credits. You can run into an issue w/ violating Dodd-Frank Act. Generally speaking ask for 3% of the house price as a Lease Option Consideration fee that is non-refundable. It basically keeps the house off the MLS and provides the tenant buyer with time to sort out their credit in order to qualify for conventional loan. Separate your lease contract from the option to purchase contract in case deal goes south.

Agreed, remain vigilant of the Dodd-Frank Act. The key violation is to never use rental payments as a credit toward the purchase price or create ownership equity in the property, it's all about proper money allocation, especially if you are doing high volume Least Options deals. As Clemente said, I do ALL lease contracts completely separate from the option to purchase agreement. If you stay within the law guide-lines then you will never have a problem.