Renter want to purchase house (need some advice)

Hello Guys,

I’ve got into the housing market to hold and rent, never thought about flipping or rent to own, but I have a tenant who made some repairs and upgrade to 1 of my house and at 1st she wanted me to sell her different house but now she found out her credit need work and she want to stay where she’s at now since she’s made the improvements.

My question is from what I’ve read I should keep her on her rental lease but have another contract for the rent to own.

  1. I’ve found some rent to own contracts online but I want to know if there’s a specific 1 that some of the season rent to own guys use (something that has more protection for me as the seller)

  2. Which selling price do most people go with (what the house is worth now or what the house should be worth when the tenant is ready to buy 2-3 yrs later) I was thinking what it will be worth later.

  3. When you put aside X amount from the rent towards there down-payment of the house, do you give the money back you collected for the down-payment when it’s time or do you just apply it back to the buyer as (sellers assets)

  4. Can anyone point me to a thread that might have all my questions already answered in them ( I did some forum searching but couldn’t find much and if there’s anything that anyone went through that they can share would be great.

Thank you

Why not just sell on a contract for deed? You retain title until the contract is satisfied. The buyer gets all the tax benefits of ownership and sssumes all the responsibilities of ownership. In essence, you become the lender.

First of all the tenant NEVER ends up buying the house. Develop your strategy around that. Keeping that in mind choose what you do based on that thought:

  1. Rent to own is specific to where you live. For example in Texas there is a state law governing executory contracts. Make sure whatever contract you use is ok in your state. Go to and ask for advice from people where you live.

  2. The selling price needs to be what the house will be worth at the time of purchase. You can always lower the price based on market conditions at that time but you can’t go up. You are setting a ceiling price in the contract.

  3. Make sure that the payments to her are option payments so that when she does not buy the house she has no claims on the moneys paid. It would be very bad if and when she decides she can’t buy the house she asks you to pay her the $5,000 she has paid on the house back.

Dave thanks for your Input, I would only do that if I didn’t already have a mortgage on it. I rather have them stay as a tenant while I collect extra for the downpayment so if/when they’re ready then I will sell. If not then they will lose that money and I still keep my house.

What I also forgot to mention is that she’s on Sec 8 now and she’s does hair so while sec 8 pays her rent, she will be giving me the downpayment part, If I use your method we will have to stop sec 8 because I can’t use that money as her mortgage payment.

Bluemoon06 thanks for your input as well. I’m looking at the PA law now when it comes to rent to own and it did make sense to me to sell for what it would be worth when/if she buys.

In order for your renter to obtain traditional financing, they will have to qualify. I suggest having them talk to your mortgage broker to do a basic prequalification. They will need two yeas of tax returns and a decent credit report. If they obviously don’t qualify based on the tax returns, then don’t bother. But if they have enough reportable income, it is worth helping them with their credit by either helping them dispute things or by sending them to someone that will do it for them.

The rent premium (option) payment should be above and beyond her rent. Since these are two different agreements, you do not want her rent to go to the purchase of the property. Rent is rent.

Typically there is also an option fee that goes along with the signing of the Lease Option or Lease Purchase Agreement. This is a non-refundable deposit that becomes part of the down payment. This is usually around 1 -3% of the purchase price.

You may want to check the Section 8 rules again. A couple of years ago, Section 8 did permit voucher payment to go toward home purchase. Don’t know whether th sequester has tightened up or eliminated the home purchase option for Section 8. I do know that the Section 8 programs in my area are not taking any new applicants.

You will want to make two contracts the first being another lease and the second being an option do not do a land contract or a rent to own. If things fall apart you will want to have an option in place so there is no foreclosure process rather you will have a person who does not execute the option.

Do not be cheap, get good legal guidance from an attorney.