In a soft market, real estate investors need to consider all of their options. How to do a rent to own should be at the top of the list. Rent-To-Own Selling is a way for there to be a win-win-win real estate sale even in today's market. Selling your investment property using a “Rent-To-Own Strategy” is a way to set yourself apart from other sellers, to get your home SOLD & realize your investing profits and also to broaden your list of potential buyers. How to do a rent to own is not without risk to sellers but the risks are manageable.
How to Do a Rent to Own – The Option Fee
A one to five percent “option fee” is completely justified because the seller cannot market the house during the option period. The option fee is typically applied towards the down payment when the buyer exercises the option to purchase. There are a few other issues the seller needs to deal with when determining how to do a rent to own.
How to Do a Rent to Own – Setting the Selling Price
There are two basic ways of setting the selling price that you want to consider when learning how to do a rent to own. First is agreeing with the buyer how to set the price at a future date when the purchase agreement is exercised. This is not my favorite way of how to do a rent to own. Using this method typically means having the house appraised for market value in the future. The risk is that the buyer won't like the price and will walk away from the purchase.
The second way is setting the price up front when learning how to do a rent to own. The risk here goes to both the seller and the buyer. The risk to the seller is the house appreciates more in value than the agreed to selling price. The buyer's risk is that it depreciates in value. How to do a rent to own should have a price 5 percent to 10 percent above the current fair market value.
This compensates the seller for not being able to market the house and anticipates appreciation of the value. When figuring out how to do a rent to own, the buyer can always walk away from the deal if the house doesn't appreciate. Another step in how to do a rent to own can be the seller agreeing to lower the price if it doesn't appreciate as anticipated.
How to Do a Rent to Own – Motivating Buyers
In addition to collecting the nonrefundable option fee, the seller needs to charge an above market rent during the option period. This, along with the option fee, applies towards the down payment. How to do a rent to own puts the buyer's skin in the game.
One final step sellers can take in how to do a rent to own is filing on time monthly payments with the three credit bureaus. The typical reason buyers go with how to do a rent to own is because of a credit report problem. Reporting their monthly payment helps improve the buyer's credit score.