Rent to Own or Simultaneous closing Owner Financing?

Looking to sell my house

Either as rent to own or do seller financing with 8% down The problem is

  1. the buyers all seem to be short on cash
  2. low credit scores 520 and lower
  3. liability with rent to own… who pays for maintenance etc… what keeps then from paying for a month then claiming bankrupcy etc

Is owner financing or rent to own the only 2 exit strategies you’re
wanting to use?
Or do you just want this house sold?

Just a side note…

  1. Keep marketing. If someone wants the house bad enough, they’ll find the $$$.
  2. Look harder. There’s folks out there with better scores.
    3.You could defer maintenance to the potential T/B.


JasonAL is correct: the mere fact you are marketing your property with the “owner financing” terms should net more interested parties. Of course that brings more buyers who are not at the best FICO score you would like to see.

But the more you market, the more eyeballs should see the property. Or at least that’s the hope, anyway.

As far as your exit strategy, if you are looking to get potential top dollar and are willing to hold onto property/plus keep the mortgage loan, you should really consider vesting the property title into a revocable inter-vivos Land Trust. It could offer you the best protection and a few exit strategies.

Meaning, just create a land trust (you are grantor/beneficiary) and the co-beneficiary would be your tenant/buyer. You could name a LLC (that you would create) as trustee or you could nominate a trustee that specializes in land trusts and servicing. (For example, PACTrust at It’s preferable you use the latter and nominate an unrelated entity. Since a trust by definition states the beneficiaries “control” and dictate directions to a trustee, in all effect you as grantor/beneficiary would still have full interest and control of how the property is used, etc. Plus you could have a limited power attorney signed by the tenant/beneficiary for the voting rights, so that you have unfettered control and access to your trustee. The T/B granting you limited power of attorney doesn’t revoke their beneficiary interest, just allows you to “vote” in their place when dealing with the trustee.

So, since you mentioned rent-to-own, in this fashion (creating the trust) you would create an occupancy agreement (just another word for lease agreement) that spells out the terms of leasing the property from the land trust by tenant/buyer.

Two advantages for you (of many): easier eviction proceedings (if they are ever late on payment a notice of pay or quit is sent. If default, eviction starts according to terms in occupancy agreemend and land trust agreement and could have tenant out in as little as 30 days, depending upon state laws) and you protect yourself from potential pitfalls of traditional lease-to-own/rent-to-own scenarios. You can also spell out terms of how equity in both principal reduction and equity appreciation, is split between you and tenant/buyer. You are free to do as you will as far as that percentage, since you are the owner and are offering owner financing. Typically it can be 50/50, but hey, it’s whatever you get them agree to sign on. :cool

Advantage to tenant/buyer (could net you better qualified applicants, who see the value in the following): You could by nature of this arrangement, charge triple net lease on the occupancy agreement and therefore would have the potential to create positive cashflow on the property, because the tenant/buyer would be given the tax benefits of deducting property taxes paid and the interest on the mortgage note. They should see value in paying a full PITI monthly payment, because they reap the true financial benefits (under IRS guidelines) just as a normal homeowner would.

Plus you’re able to defer all maintenance issues to tenant/buyer, since in effect they are a “homeowner” from day one of signing the occupancy agreement and through the terms of being a beneficiary in the land trust.
And you may relieve yourself of many of the headaches of day-to-day landlording that normal renting has, since a tenant/buyer is more inclined to take care of the home and keep up with maintenance, etc, because to them it is “theirs.”

To get a very clear and better understanding of the benefits of offering rent-to-own on your property by utilizing a land trust, you should check out

Hope this gives you some clear, solid options/strategies to protecting your investment AND for the highest potential profit.

Best wishes!

Ed Bisquera

P.S. I am a Mortgage Planning Consultant and am not attorney, nor have I played one on TV, so you should consult with a bonafide real estate attorney regarding the information I shared above. (You may have to do a little hunting to find a RE Attorney that truly understands the mechanics of a Illinois Land Trust)…
Just a little disclaimer… :biggrin

omg since when did lease/option a house become that complicated? i have headache just reading them. why does setting up a Land Trust better than straight out option it to a TBer? eviction in minimum 30 days doesnt sound fast to me. haha… please explain in plain english.

and i also dont understand why split equity with TBer? i thought the point is to structure a deal so that if they dont exercise their option, we keep the money!

:cool YOU really want to sell this home this is why you are offering owner finance !!! SO yes as others have said you will get more lookers as they do not have to go to a bank and these buyers are more than likely credit troubled !!! NOW i say you are on the right track if they do not have the money down move on to the next buyer !!! ONE will come that can afford the down !!! AND then you sell and do all your paperwork /// in 60 days you shop to sell the mortage note and you sell it for the most you are offered!!! AND with this you will not care if they default as they did not do it on you !!

I buy and sell like this all the time and have never been burnt by a sale !! I most of the time get about 80 % of the face of the note /// just something to keep in mind on this type of deal

Hi Big-fat-cow,

Setting up a lease with option to purchase through setting up a revocable land trust (term of 2-3 years or more, whatever the investor is comfortable with) offers many advantages to BOTH the seller and buyer, who are named beneficiaries in the Trust, over the other lease option method.

Your best bet is to investigate at and read about the EHTrust from the company at the website. But I’ll cover a few points here.

A lease option by nature (at least in most parts of the US) allows the TB’er equitable interest in the property, which than in most cases requires you to FORECLOSE on the buyer (which can take 2-6 months, time in court and undue amount of stress on the seller/investor), instead of EVICT under the terms in the Land Trust and Occupancy Agreement.

I’m not sure how you say it’s complicated, since essentially you have two documents or contracts with a “normal” lease option. One, an option contract that states a “down payment” for the option to buy later and the other, the lease agreement, which probably indicates some portion of the monthly payment will be credited towards purchase.

That’s all fine and dandy, but it still doesn’t give as many benefits to the buyer or seller as a land trust lease option. Incidentally, using the land trust method requires three documents, one the land trust agreement (which can be equated to a option to purchase agreement), two the occupancy agreement (which is again similar to a lease agreement) and three, an assignment of beneficiary agreement to place the residential beneficiary (similar to the term tenant-buyer). A fourth document may be used and that’s a power of attorney to acquire the voting rights of the residential beneficiary. Only used to exercise complete control over direction of the trustee NOT to exit the residential beneficiary, who still has beneficial rights to the terms on the trust. Basically it means you retain full control as investor, but still allow the residential beneficiary their rights as defined in the trust agreement.

I’m not saying it’s the be-all end-all solution, but it does afford many protected benefits for both parties. (like gives peace of mind to the res buyer that the monthly payments they pay out, will for sure go and pay the underlying mortgage and not rely on investor to pay it, because a third party company, chosen and directed by the trustee of the trust will be receiving the payments, paying the mortgage company, property taxes, insurance and any positive cash flow will be sent to the seller/investor. How’s this for another benefit to seller/investor: POSITIVE CASH FLOW on your rent-to-own property through triple-net lease charge.) :biggrin

And how about another benefit: no worries of outstanding judgments or liens can be placed on the property, by fault of either party (seller/investor or buyer) since the title is now vested in a trust and by law a trust is personalty property. So if one of the parties was victim to a lawsuit, lien, etc, the lien can’t attach to the trust’s beneficiaries and can’t be broken up or divided to satisfy that lien, judgment, etc.

If you’ve never had a problem with the current lease option method and you get enough TB’ers to sign on the agreement, than you’re fine. I’m not here to change the way you want to do lease options and I’m not sure of how it’s treated in Canada. But all it takes is one lease option purchase out of 100 to go sour, to make an investor re-evaluate his/her options.

And trust me, it’s happened to my dad, my best friend and his investor partner, before they became acquainted with the land trust method of securing and selling property. Getting screwed badly on one deal was the impetus for them to search for a solution and for me to realize I can learn from the thousands in dollars of lost money and lost time and do it a different way, that protects all parties in the transaction.

Also, offering an equity split is your choice and how you sell it to the end buyer. If they know they get a split of equity (again whatever you can negotiate) for paying a triple-net lease AND get the tax/interest write off, they will enter into the mindset of “homeowner” and most likely want to either buy, refi or sell the property they have a beneficial interest in. 50% of all equity to you, while a res beneficiary pays you, with a positive cash flow and you get a “down payment” too…hmm…not a bad proposition. :cool

Also, if you want to tie the amount of deposit to the equity share, that’s suggested too, as someone with 5% versus 10% would get a different equity share. i.e. 10% deposit (down) earns a 50% split 5% earns 35% or 40%. It’s all relative to what is worth it to buyer and how it is rewarded to investor for investor allowing buyer in for a low deposit.

But that’s just my two cents…I’m sure there are some other seasoned investors that look at the land trust lease method from Bill Gatten as either the greatest thing since sliced bread or not worth it to learn.

Anyone else on the board here have any considerations regarding this?



How is PDX gonna sell his GattenTrustCrapola if you keep asking him hard questions?

But if you do need to ask him question, my opinion is that you need to do it SOON…I’m thinking he’s not long for this world.

He’s just another shill…



I appreciate the opportunity for debate and comments. And no I’m not selling the Gatten Trust; it’s available to use as an option and I make NOTHING if you or anyone else uses it.

As far as being another shill, that’s a compliment I guess, since the prevailing impression people have of Mortgage Brokers is just one step above a car salesman.

And no, I have a long term situation to keep me in the Mortgage Business for quite awhile.

On a positive note and to move this discussion along to brighter pastures, may I inquire as to what you do Keith? I’m going to assume your a seasoned RE Investor and I really do honestly welcome any comments of how you handle lease options or owner financing, because it would be nice to add to my collective research.

You’re welcome to respond here or private message.

Thank you,

Ed Bisquera

P.S. They weren’t hard questions at all…LOL I guess my reply was longer in the tooth than folks prefer to read. I’ll keep it shorter next time. Cheers! EB