Tenant requests RTO/LO ?

5 Replies

I have a tenant that approached me about renting to own my property. I was forced to foreclose and wound up with the property and the tenants.  What should the tenant pay for in addition to the monthly rent if they do want to go forward with the option to own? Does anyone have advice on where to go for the appropriate paperwork?  I'm in Texas.  Thank-you!

Texas some years ago passed state level statute greatly restricting lease/option, rent to own. I would suggest you find the LO trainer, John Jackson, who is in TX and his LO/RTO education has the TX twists. You'd also get the paper work and education on how to use the paper work.

Creative financing, LO/RTO is a sub type, is the knowledge deal scenario. IE you need educataion, not just someone emailing the documents to you.

In general for others;   Buy BP's Zero Down creative fin book and all other Creative books.   Go to youtub and search;  lease option, and find the national trainers buy their education.  I have its all good and modestly priced.  Joe McCall, Joe Bodeck, Joe Crump and JOhn Jackson.  Bought all their stuff, its good.

What is missed by newbies with a tenant asking to RTO, is "why"? Do you really want to sell the hous? I only RTO / LO my dogs, mobile homes, hard to find quality tenants type assets. And I DO want them sold via putting the tenant who qualifies into a note or contract for deed.

Next is; why this buyer? (the tenant). Very (very) few tenants are qualified buyers and you need to say no. But how do you know how to screen them? Well,,,, this is apart of the needed education. An inherited tenant may not even be a good tenant!!!! Let alone someone who can get a bank loan!?! Worse, newbies think they can fix that by them being the bank and seller financing to the tenant. I do this alot. BUT why? If they are too weak to qualify at a bank, why on earth should you take the chance and finance to them? I have foreclosed on a few notes and taken the house back.. So even I have my failures. You will likely fail without education. The quick guide that 99% of tenants who want RTO will fail; have them pull their own credit report. The FICO will be 20% higher then what a bank will get, must be >680. Get a screen shot of their bank balance; Must be >5% of the value of the house. Almost zero tenants will pass this simple screen.

There's other recently started threads on this same topic in this forum. Read the current and past threads. But Jackson's TX education, even if you decide not to do RTO, just to be educated.

Start with; do I want to sell this house? I suggest today, keep all decent houses. They will continue to go up, rents will go up, they will cash flow even better in the coming years. I see no reasons to LO/RTO any decent house today. This is NOT the top of the market. LOL LOL

@Bob Randolph   A similar question about what a tenant should be paying was asked earlier today. 
Initially, they aren't paying for anything other than the monthly rent and utilities, as with any standard rental. Until they exercise their option that's what they are. . .tenants. Now, if they do in fact exercise their option to purchase, that's where the specifics need to be spelled out as to who pays what, as in any purchase and sale. You are guided by your negotiating skills and state and local laws.
As for Texas, there are mucho misconceptions about the supposed restrictions TX has in place making lease options illegal.  Nonsense.  They are legal and not much different than doing a lease option in any other state, other than a few additional clauses in the required lease option agreement.

Foreclose on a "rent to own?" As others have said, it's time to get some experienced assistance...legal counsel would be in order since you may have already violated Texas statutes which could put you in a very precarious position.