i read in a lot of places saying that rent to own is a bad idea? let me know what the flaw is?? i thought it was a good idea ??? to go for rent to own. Here is an example::
$4000 down for option consideration
$750 a month w/ $200 of that going towards credit to purchase
No Qualifying- We’ll even help you build your credit in the mean time
2 year option to purchase at set price of $80,000(new condos across the street going for $150,000++)
Don’t miss this oppurtunity to experience your own pride of ownership, ACT NOW!
why cant i just re-rent it someone for $700 a month, then later buy the property for $80k, seems like a good idea to me ???
This doesn’t sound like a bad deal. Actually I don’t think rent to owns are a bad deal at all. In fact, when you are first starting out they can provide a great way for you to make money to start an investing career. So in the example you’ve listed. Everything sounds good to me except the option down payment. The thing to remember here is everything is negotiable. I would try to get the option payment as close to zero as possible. Feel it out and tell them all you have for option payment is 750.00 and see what happens. Also, make sure your option payment is credited towards your purchase price. SOunds like in your case it will be 80K (also negotiable). The condos across the street are 150K? Ask an agent to run comps on the ones you are looking at. I can’t imagine the ones across the street would be twice as much. Make sure you are comparing apples with apples. Sometimes having an older unit across the street from a newer unit is a good thing because those across the street will drive your comps. Check it out. If they are gibving you a 200.00 rent credit that may mean they are flexible on the payment as well. As far as sub-letting the place out. Now you are going to make this a sandwhich lease option…meaning you are putting yourself in the middle. Just make sure they don’t stipulate in their contract that you cannot do that. If they don’t put this in you are golden…oh find out what the rent comps are in that complex. Go knock on doors. Tell people you are thinking about buying in that complex and ask them if they are renting. Call other for rent signs and see what they are asking. If the rents are only 400.00 in the area…renegotiate. Does this make sense? I think if all the numbers work out you could have a great deal. If I remember correctly you are in CA. This condo maybe worth 160K in a year or two. Then you would have 80K to invest in another prop and on your way to that lifestyle you want. Oh…and try to get the price locked in for as long as possible. I would try to shoot for 36 months. This way if you lease it to someone else (sandwhich lease option) you make theirs 12 months. Do you get the pic. Let me know if this helps. I think these are a great way to make money! Good luck.
Wow, thats what i thought! thank you mark!
i just don’t get why they don’t just rent it out. :
Update on the issue:
i just did a research, and this apartment will rent around $500,
basically i will have $200 negative cash flow every month. still seems like a good idea!
if you look it at, you are also getting $200 credit toward your house.
so now if the house is worth over $4000(option price) when you excercise the option, that is all profit.
Well remeber, all of those numbers are negotiable. I owuld try to turn a good deal into a great deal. Tell them you found out the rents in the area are only 500 and see what they say. See if they will drop the rent for you. Check the sales price and make sure 80K isn’t too high. Also, I think you should really try to negotiate the 4K option money. Try to hedge yourself as much as possible. think worst case scenerio and if you can’t exercise the option you are out 4K. Does that make sense?
Rent to own or lease option can be evil for the occupant. You are under contract law. You do not control title in most cases. You are not on the insurance policy. If you have more than a deposit and default you lose. How are you protecting your interest if the place burns down? Sue them? What if they can’t deliver title when you are ready to exercise your option.
Yes, there are ways to protect yourself but generally that is not what they want. They want premium rents and know that the vast majority will fail to exercise the option.
Why do you want to pay a retail price? Why not find a motivated seller that will offer you a better deal. How about $500 or less rent(just make their payment), $500 option money, $70K sales price with title to be held in a land trust with an independant trustee.
The other thing you have to be carefull of on condos is what about special assesments in the future. I have seen assessments of several hundred for a years time to do improvements.
These are all excellent points brougt up by Bud. Yjis proves my motto: There isn’t one of us smarter than all of us put together! Thanks Bud.