How does a rent-to-buy program work?
Thanks.
look in the lease option forum
tenant signs lease option contract.
this is a legal document that is considered a contract for sale - at a future date.
the tenant pays rent to the owner and a portion of that rent goes toward principal for the agreed upon sale price…or formula of a price.
after X amount of time - whatever the L/O contract calls for - the tenant can go through with the deal and purchase the home , but that tenant must obey the L/O contract or the owner/landlord can deny the execution of the sale based on tenants delinquency.
there are different L/O contracts and like any contract - everything is negotiable.
word to the wise. i’ve called on several L/O advertisements - and they are being offered by people who don’t know what they’re doing.
in my limited experience with speaking to such individuals - they’ll say things like, “forget the L/O - we offer 100% financing” or “don’t worry about our lender, we can rent it to you.”
a L/O contract is a contract for sale. the question to ask any person advertising for L/O is:
“Do you have a mortgage on the property?”
“Who is your lender?”
Then, you might call the lender and ascertain whether or not such a contract would violate their DOSC (due on sale clause), chances are it will.
if the owner, owns it straight up, and you can sub lease the unit for a positive cash flow, that can be a very good situation.
ie. you enter into a L/O with the ability to lease it yourself - you find a tenant and your tenant pays you 1400, while you pay the owner 1200.
it’s like anything else in rei, certain areas of the country offer different ways to acquire real estate.