Why would anyone accept a lease option, rent to own deal? Why would you, as a seller/investor look to find rent to own tenants? How can you use this technique to LOCK IN profits that are much greater than would be found in a straight sale?

Basically, the advantages depend on which of two end results occur: either the rent to own tenant completes on the property, or they don’t. You make money either way!

There are MANY people who have less than sterling credit, might not have a long time on the job, or not have a ton of money for down payment, closing, etc. Many people WANT to buy a house - and they expect their credit, job conditions, down payment amount to improve over time. They LOVE the idea of being able to buy NOW, on a rent to own basis. You can help these people out, and be paid handsomely for your efforts.

I’ll assume a $100,000 property, and you would offer $5-10,000 down, but be willing to take even less, even possibly take monthly payments for the down payment. Because of providing “easy credit”, you can increase the price by an amount of between 5 and 20%, depending on how long the rent to own period is, your local market, individual’s credit situation, etc.

Lets say you buy a property for $90,000 that is worth $100,000 in the open market, and is advertised at $110,000, with 5-10,000 down, and monthly payments of $750 over a 3 year period. Note that ALL of these numbers are variable - whatever works for YOU and your rent to own customer. You have LOCKED IN a profit of $20,000 in 3 years time, less mortgage pay down, with $750 a month to make any mortgage payments in the meantime. Use a mortgage table (it depends on the interest rate charged) but it wouldn’t be any more than $100 a month that the mortgage is reduced by. Total profit would be $20,000 less $3600 mortgage paid down, with $750 a month to offset any carrying costs, mortgage, etc - not a bad deal!

Should the tenant be unable to complete on the purchase at the end of the term, you can agree to renew the agreement for another period, with a higher purchase price.

That sounds like a very good set up for the vendor, but what if the rent to own tenant bails out on the agreement? The majority of rent to own agreements fail to complete, so this is a fairly likely occurence, but can be reduced by picking your tenants well.

In this case, you are left with the down payment of $5-10,000, payments that covered the mortgage and carrying costs for however long the tenant stayed for, and they probably took MUCH better care of the property than a normal tenant, as it was THEIR property!

You can simply advertise for another rent to own tenant, and collect another deposit, continue collecting rental amounts, and continue carrying the property at no cost to you.

You can carry a portfolio of properties with this method - there are virtually no maintenance requirements - its THEIR property, so THEY have to fix it, mow it, weed it, paint it, etc - and you can carry as many properties as you can get financing for, or even “buy” under a rent to own, lease option type of agreement and then rent out to other tenants at a higher purchase price!

The options are endless - and it doesn’t take a lot of ads to find a TON of willing rent to own tenants! You can set up the deals however you wish, and you can “give them a good deal” by reducing the deposit requirements, or extending the term - you win either way!

Andrew Larder Creative Real Estate

To receive free info on no or low money down real estate investing, send a blank email to: monopolyinvestments@getresponse.com

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Searching for just the right home can be very exciting. You may plan ahead for the number of bedrooms and bathrooms that you want. Or imagine preparing for dinner parties in a sun-filled kitchen. Although these things are important, there is more to a good home purchase than the rooms it contains. Following are just a few suggestions to consider. Take some time to make a list and determine which additional priorities are important to you.

Survey the neighborhood during many different times of the day and days of the week. Are you comfortable with the noise, activity levels, traffic volume, etc.?

If you have, or plan to have children, check with the local school board about the neighborhood schools. What is the student/teacher ratio? How are the test scores? How involved are the parents? What programs are available for students? What credentials and how much experience do teachers bring to the task?

Is the foundation of your new home sound? Is it well built?

Are the existing appliances sound or will they need to be replaced?

Are the home’s major systems such as electricity, plumbing, heating/air, and roofing in good condition?

Is the home energy efficient?

How much major and/or cosmetic work will be required?

What will your commute look like? If possible, do a trial run during rush hour.

What is the crime rate?

What permits have been issued for new projects and/or construction in your new neighborhood?

Will you be expected to pay homeowner association fees? Are you comfortable with the covenants set forth?

Does the neighborhood provide sufficient recreational opportunities?

Will you be moving into a home or joining a community?

Is the local grocer clean and well-stocked?

Enlist the help of a good real estate agent, reputable home inspectors and others to help find a home with more than just a pretty face.

Beyond Mortgage Payments

Owning a home involves far more than keeping current with your mortgage payments. There are a number of costs associated with home ownership that extend far beyond the basics (i.e. principal, interest, taxes and insurance). Assuming responsibility for these costs can be a big financial adjustment. This is particularly true if, as a renter, you are accustomed to responding only to fixed expenses (i.e. rent) without much concern for variable expenses (i.e. broken pipes and new water heaters). Well, now you are the landlord and it is up to you to handle the mortgage, in addition to all of the variable expenses of home ownership.

Routine and emergency maintenance issues are an inevitable part of homeownership. The dishwasher will need to be replaced, the roof may begin to leak, or the furnace will give out. You can minimize the financial fallout by planning ahead and budgeting in anticipation of these expenses. Recommendations vary, but you would do well to save an amount equal to at least 2% of the cost of your home for annual upkeep and maintenance. Set aside funds toward this amount each month. In this way you will eliminate the scramble and panic of getting the funds together to get that tree off of your roof.

In addition to maintenance and upkeep, there may be other costs you will need to absorb. These include water, sewer and sanitation expense; homeowner’s insurance, and property taxes. It is important to understand the full cost of home ownership before you sign on the dotted line. You can build confidence in your ability to handle these new expenses by making a trial run. Do your best to estimate the total cost of home ownership. Use that information to make a budget. Before you sign on the dotted line, live within that new budget and see how well you manage. You may find that you have adequate financial resources, that’s great. If you find that you are a bit short, you may need to make some adjustments. Being proactive now may help you avoid foreclosure in the future.

Nicole Soltau is the President and Founder of CreditUnionRate.com
The Leading Credit Union Directory
Search, Find, Join.

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What is SIPPS? What is A-Day? How could it affect you? Do you have investment property or want to invest in property? These are all questions, that you will want to find answers to.

Referred to as A-Day, April 6th 2006 will be an historical date for pensions in the UK and will mark the beginning of one of the most radical changes in pension legislation for decades. It is because of this, that estate agents, developers, and any landlords looking to sell any suitable investment properties are encouraged to advertise their properties for sale now in the run up to this exciting day.

It will be the first time that a pension saver will be given ability to purchase residential buy to let property inside a SIPP (self-invested personal pension) and many industry experts are predicting a massive amount of interest from private individuals and pension fund managers that will want to be part of this potentially huge market. For those looking to be kept up to date on SIPPS, investment property for sale and other issues relating to buy to let, they can find out more by clicking here

For those looking to take their first step on to the buy to let ladder but not sure about all the technicalties surrounding SIPPS, it may be worth spending the next few months doing a bit of homework and looking at your current pension provisions. It may also be worth getting a simple buy to let guide
to get a basic understanding and also looking at some of the different buy to let mortgage products available. As investors get more experienced and learn more about SIPPS and how they can benefit from it as a landlord, they can then decide at which point to take things further. Once A-Day arrives in the UK, and the activity starts for newcomers to the buy to let market, it is anticipated that this may generate another boom for UK investment property. Most importantly landlords will see this as another ideal opportunity to snap up good quality one and two bedroom first time buyer property especially if it falls below the stamp duty threshold price bracket.

For those not yet committed to the buy to let market, this will be an ideal opportunity to purchase a ‘ready made’ buy to let with the advantage of earning income from day one if they purchase a property with tenants already in situ. For any landlords looking to sell their investment property, this media coverage surrounding SIPPS and A-Day, could create an ideal window of opportunity to sell their buy to lets as the demand is likely to increase for suitable investment property for sale. It may also be worth considering trying to sell investment properties with tenants in situ as investors will be keen to see properties knowing how they are already performing.

As a property investor concerned about cashflow and profit, the opportunity of selling an investment property with tenants in situ is that it can result in considerable savings during the sale process, not to mention that the landlord would retain the rental income whilst the property is being marketed. Plus, if the buy to let is sold to another property investor, they are less likely to be involved in a property chain and many experienced landlords have good relationships with buy to let mortgage lenders resulting in fast turnaround times for mortgage offers. The other benefits of selling your investment property with tenants in situ, is that it gives the newcomers to buy to let, the chance to purchase a ‘ready made’ investment property without the normal set up costs associated with sourcing tenants, tenancy agreements, credit checks etc. If the property is managed through a letting agent, and the landlord sold the property to another landlord, the letting agent will be grateful to maintain the property under their management. Therefore, the new owner hasn’t had the expense of souring new tenants, and paying the usual set up fees associated with letting a property. The letting agents retains responsibility for the property, the seller hasn’t lost any income and finally, the tenants haven’t had to find alternative accommodation whilst the property is for sale. It’s a win win situation.

If the new buyer decides to transfer the property into a SIPP at a later stage, then it is likely that there will be costs involved but a good SIPPS provider will assist in securing the right product for the investor.

Jennifer Tweed is the founder of buytolet4sale.com, one of the UK’s first property portals dedicated to all types of investment property for sale and everything you should need for your sale and purchase. Learn more about buy to let
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