Rent to own

1 Reply

Hello,

I am new to the rent to own space and need help understanding the returns on this deal - all detail out how I am thinking:

All in cost w/ rehab: $40,000

Sell Price: $60,000 @ 10% interest amortized over 30 years (expected holding period 36 months).

Option money: $2,000

Gross Rent: $750

Expenses (property taxes and insurance): $100

Net Income: $650

-$100 of $650 toward tenant buyers purchase.

-$550 towards rent.

-----$550 x 12 : $6,600 / $40,000 (all in price) = 16.5% cash on cash return

-----$2,000 / $40,000 = 5% / 3 years = additional 1.6% per year

-------the $20,000 expected profit 50% return on the 40k / 3 years = 16.66%

------ Where I need help is analyzing the other $100 thats going towards the loan but in reality only servicing interest.

So all in with that simple math I am at: 34.76% per year

I guess where I need some help is on that 10% on the loan would I just add that making my total return around 45% per year?

Any other thoughts, anything I am missing?

Sorry for the drawn out explanation just having trouble getting clear on my analysis.

@Jynell Berkshire any thoughts?