Please help me out on my current residence: Renting to own

Hey all, thanks for taking the time to read this.

I currently live in a 3bd 2bth house that we’ve lived in for about a year and a half (built new) and are building another house that will be done for closing March 10th which is fast approaching. I would like to set this house up on a rent to own basis (thought this was a lease option but most of my searches and readings on this forum on lease options have turned up ‘sandwich’ type deals where you are the middle party) fairly quickly but am not fully sure how to go about it.

My interest only payments are ~$1,100ish and looks like the going rental rates in this neighborhood are anywhere from $1,100-$1,300 and one was even as high as $1,400 all in the exact same neighborhood. I read that the ‘renter’ should give 1%-3% as a non-refundable fee that goes towards closing if they buy and possibly another deposit equal to first months rent that is refundable less a $100 carpet cleaning fee should they decide not to purchase. I think I saw that the 1%-3% would go towards purchase but where do you make money? Say that I cash flow $200 per month at $1,300 and take $7,000 (3% of $235k appraised value) as a fee (which seems VERY high to me that someone who is looking to rent would have this much cash to put down) and $200 per month goes towards the house should they buy it at the end. In this instance, if they buy it at the end of a year or two… how do I make money? Should I not put both the $200 AND the fee towards closing or is it the one or the other.

Any help getting me going in the right direction here would be greatly appreciated as my window is closing and I would assume I should get advertisement out but don’t want to set myself up for failure since my knowledge on this subject is limited (obviously).

I’ve done plenty of searching and reading but hopefully asking direct questions specific to my situation will help speed things along as time is limited at this point.


My understanding is you get a higher rent with lease option. That’s because you are selling them on the idea of ownership, not renting. Also, you get to set the sellling price at the end of that 3 years. There’s skill in negotiating that because the property should appreciate in that time. How much of that you “share” with them is up to you and how well they negotiate really.

It sounds like what you really want is a NNN lease option. It’ll make the rent higher for sure but you have to sell them on the idea of ownership in 3 years.

if your mortgage is 1100 then you are NOT cash positive at the rental range you listed; you have account for taxes, insurance, repairs, utilities, lawncare, who is going to mgmt it, etc.

That was based on what other houses are renting for in the area. Wouldn’t someone who is looking to rent to own be willing/expecting to pay a little more than a renter or is it customary for renters to pay the same monthly payment as the market dictates for renting?

ur best bet is to sell it on contract, like CFD or L/O, 2 yr agreement and cash out at the end. u keep the profits, they keep the house in the end. y share it? u can chrge a higher pmnt per mo because as the other poster said, u r selling on future home ownership, therefore u get a sizable DP, a nice mo pmnt with cash flow, and they get the deed when they complete the contract.

You are doing interest only payment currently? It’s going to be very hard for you to get enough money to get any cash flow at renting this out.

You will have a difficult time earning a positive cash flow as long as you are renting or leasing ONLY the use and occupancy of the property. Tenants have no incentive and resent “making their landlord rich”. Tony’s on the right track in saying you can get higher rents selling future homeownership, but it’s still iffy.

Your property is an asset. Why not use all the benefits of the asset to your advantage? Why not trade the right to the mortgage interest writeoff, property tax writeoff and share future appreciation with your tenant, if he will assume responsibility for maintenance and repairs? You can easily get much higher rents (always a positive cash flow) and you’re not selling future homeownership, but immediate homeownership benefits to your tenant. Do it in a land trust with a triple net lease and you will have no responsiblity for maintenance and repairs and your Trustee will collect the rent and mail your positive cash flow to you each month. That the way I do it.

Yes, it’s already an interest only so that’s the lowest it’s gonna get w/o doing an option loan and causing the payoff to increase. Sorry, I thought I had that in my first post but I see I left it out.