What are they wanting when you state rent-to-own

[Dee-Texas]

:F
Just getting frustrated I guess. I have a really nice 3/2 at a little below market price AND market rent. I'm trying to L/O it with 3K down and $575.00 per month.
I've had about a zillion calls wanting to know *how does that rent-to-own thing work and how much*?
OK....I'm going to vent a little.
They want a very nice house for rent only, not paying anything down OR they want all of the rent to go towards the purchase price, thinking I'm going to be their bank for 30 years...... Yeah, right..... they have the credit of a turnip!
It's getting harder and harder to L/O any property, because if they have decent credit the people can qualify for some type of loan...BUT that leaves MANY, MANY  more that have 0 for credit.
I'm trying to figure out a *twist* on this L/O thing (selling side) because of the economy now.
Anyone have any ideas? Appearing to give them what they want?
Something like Lonnie says in "Deals on Wheels" they can have 0% interest if you can get your price.
The other thing that has messed up things is that snaffue on the contract for deed. Can anyone tell me how they handle that with insurance and taxes? I'm not so worried about the due on sale as I am the taxes and insurance. How to have them pay and me still being covered.
OK.....thanks everyone for listening...I had to vent and maybe someone has an idea or we can all brainstorm this one together.
Great $uccess,
Dee-Texas

[agkatz]

Thanks for your post.

Even though it's a PIA, I always enjoy reading about real life experiences that shed some light on how things work outside of Seminar Land.

- Adam.

[makenmoney]

Hi Dee,

I sympathize with you and can certainly understand your frustration!  Your post just made a few thoughts come to mind.  I only have 2 houses with L/O and I'd certainly like to hear the answers to your question from someone more experienced than me.
 
The first thing that comes to mind: Is your house in a neighborhood in which people are interested in owning properties?  You are asking very little and at a very low rent.  At that price you may be attracting a different clientel.(sp?)  The  2 houses that I have are in neighborhoods that are primarily home owners with a few rental properties here and there.  The tenants calling me, while they didn't understand all of the aspects of Lease/option,  expected for me to ask for an option fee and my rent is slightly above market.  

Versus:  a little house I have as a rental in which there is no way I would lease purchase.  I don't discriminate at all but there is a population out there that want something for nothing, will rent to own a big screen TV for 48 months at $200.00/month, and are not interested in the least bit about actually improving their credit to eventually purchase your property.  They don't want to put up any money for it because they know they'll lose it!!!  There may be a few people in that group who want to own but they may be few and far between.  

I had a similar situation with another house and chose to sit on it for a couple of months longer than I wanted to.  Instead of leasing it in a couple of weeks to the greatgrandmother/grandmother/single daughter/9 dogs (I don't do pets). I chose to sit tight and pay a little more money up front for the vacancy.  But, I now have a nice couple with kids that are taking excellent care of it, improving it, and telling me they want to live there for 15 years!!  It's a tough choice!

About the contract for deed:  I purchased a house last year, out of ignarance, with a contract for deed.  The sellers taxes and insurance are taken out of escrow so everything was left in the sellers name.  I make mortgage payments directly to his bank and I have the last 4 digits of his SSN to check on information that I need (IE. changes in payments,escrow shortages,etc.)  I have come to realize that I was VERY fortunate with this transaction.  I have a very good relationship with the seller and by luck have someone who is honest and dependable about supplying me with information when I need it. In return I make my payments on time and keep him posted with updates and changes I've made to the property.   I have found that this type of transaction requires a LOT of mutual trust between the two parties.  It has worked out well for both of us but I wouldn't do it again and I'm working at getting it refinanced as soon as I can to have more control over my property.  

The lawyer who drew up the transaction was a well known real estate lawyer,  was as old as dirt and had done a lot of these types of transactions.  Since that time however I have talked to another real estate lawyer who advised me of several significant changes in contracts for deeds.  Most of it had to do with disclosures, disclosing appraisals and inspection reports, and an annual disclosure of how much the buyer had paid, how much was still owed, etc.  (Essentially you act like a bank). The penalty for NOT doing this is something like $300/day (yes, per day).  He has taken sellers to court and since the penalty is more than the property is worth he works at just taking the property for the buyer.  

This lawyer was recommended from the Texas Board of Realtors so I have no reason to doubt his information.   I certainly wouldn't recommend it for the type of people you say are calling you.

Sorry this got a little windy. Hope some of it helped! Good luck,

Kathy

[Ohioinvestor]

With the lease option i believe you can go 2 ways.

1) one agreement for the rental end and 1 agreement for the purchase option. This i've heard is the legal best way. I would give them terms similar to a bank loan. lets say a full market price of 105,900 at 8% -downpayment + taxes and Insurance. They do get a monthly credit but how could you or they justify why they would deserve a 0% loan and not be responsible for taxes or insurance either on the purcahse?


2) is just 1 agreement holding both aspects. This i guess can cause a problem if you need to get rid of them i'v heard they could possibly force you to file foreclosure to get rid of them.



Either way, these people want the world for free mostly. The key is to give it too them but on your terms. I will structure it similar to a bank to appease them. I will not ever in my life give them the dead before the purchase price is paid in full. I to date have always given a call date or a ballon  term for the loan.  2/3//5/7 years whatever.  I offer them a decent interest rate regardless of credit.... usually 8% but i make sure the purchase price is what I want.  

There is no negotiation in terms of the property price,rate, etc unless they are superb buyers of which i will offer a 5% discount off the price if they by it outright  immediately or within 6 months.

These are just some things for a lease option, sometimes you wait for the right person othertimes you are flooded with calls.

The biggest key to getting someone to take it is to have multiple showings at the same time.... i cannot speak any higher for that issue as these people are usually emotional buyers and when other people show interest in what they are looking at then everyone gets competitive. I always try to give them some minor info at the door let the group of different families i told the time and place too in to look around.

I say by the front door and wait for each party to come back out, when they do i ask questions of interest. Usually when i start to awnser some questions the rest will gather and we go from there. I let everyone know a summary of the terms and that i appreciate everyone coming at 1 time as time is very limited. I distingish the interested parties and hand over apps and pens and tell them i will review all apps and get back with them.

I will always leave the Downpayment optional.... for example 3k is the minimum we will accept for this property but it will definately help your application if you can and are willing to put down more. Please put down your dp amount and the #'s of years you feel we would need to get you in a buying situation as we are hoping to help you repair your credit. I let my mortgage broker review all credit reports and he will help us figure out how soon we can help to get you in a buying situation. (this is true as i do give rob the info and let him give me his opinion).

I have sat on some homes a month or 2 but when i take the time to schedule a group appt. i almost always walk out with a buyer that week.