# Rent to own



## munchkin62 (Jan 10, 2011)

I am wondering if someone could give me their opinion. I am very very very new here and really need some help. I purchased a condo a few years ago to rent out and it has been rented out and I have had some very good tenants. But the time has come due to health problems that I need to get rid of the condo. I do not want to list it with a realtor and pay the approx $$$$$$ in realtor fees. I am sorry I know some of them work hard but others??? Anyways I am looking to make as much profit on this investment as I can. Some one suggested listing with Property Guys as they are now allowed to list their properties on MLS. Any thoughts on that? Another idea given to me was to due a rent to own or lease to own on it. I was told to get a deposit on the unit and then take a part of the rent paid towards a down payment for the buyer and do this over a period of no more than 3 years. It helps someone young get into the real estate market in a city where I live that most young people will never be able to save a down payment. Does anyone know anything about a rent/lease to own as a seller? 
Thanks


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## LondonHomes (Dec 29, 2010)

Property Guys cannot list on MLS. Only REALTORS® can list on MLS.

Property Guys did announce that they had an arrangement with a REALTOR who will put their properities on MLS. However if that REALTOR is not in your area then your listing will not show up and be seen locally. As well if you are on MLS you will still need to pay a commission to the buying agent.

As for rent-to-own everything I have heard about them is that they are just trouble. I would suggest spending the money on a real estate lawyer to set up a proper contract.


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## Cal (Jun 17, 2009)

There are other threads to check out on rent-to-own. As the seller, it would work better for you, generally speaking, but not without some potential hiccups. Good advice if you plan to go this route to consult with a RE lawyer.

Not sure where you are located, but you might be able to use 'For Sale by Owner'. I am sure a quick google search would result in the info you would need to research that.

Or seeing as it is a condo, there is probably a posting board, near the mail room, that you could get permission to post a for sale note and your contact info. Again I would recommend a RE lawyer to do the paperwork for a private sale.


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## iherald (Apr 18, 2009)

I've known some people that do this. The key is a good contract and making sure that you get a good value for the condo. You have to agree to a price now.

If you normally rent the unit for $1000, what would you rent it for in a rent to own process? The issue to remember is not so much that in three years the value of your condo goes up, it's what if it goes down? The tenants wouldn't buy it, and you've lost the value of the property. 

So, you have to make sure you compensate yourself for that risk through higher rents (the portion going towards the 'down payment'). One way to think about it is what down payment do you want to have in three years? 10%? If so, divide the purchase price by 36 and add that on top of the rent.


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## Berubeland (Sep 6, 2009)

I am not a big fan of rent to own because too many owners who were doing rent to own were scammers. I knew three of them and they were the kind of characters that made you want to take a shower after shaking their hand. 

Having said that I really like the idea of rent to own and not every one in the business is a scammer. 

In the Toronto Area Mark Loeffler is "the authority" and has even written a book you can pick up at chapters or order off of his site www.markloeffler.com

It is a viable way to sell/rent your own home. If you want to know more about it just pick up the book. 

As far as selling your condo, you can list with the property guys, or list on th mls on your own for $100 at www.ihatecommission.com


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## Dana (Nov 17, 2009)

In theory, I am a fan of rent-to-own investing. I say 'in theory' because I haven't done it. I have attempted it three times, but my deals have all fallen apart during due diligence - once because of issues with the property and twice because of issues with the tenants. 

That being said, I know other RE investors who do very well with rent-to-own investing, especially since the 'credit crunch'. 

Mark Lloeffler's (sp?) book is very good and even provides access to documentation etc., but be warned that he is a cheerleader for his cause and is light on the potential downside and risks to the arrangement. 

If you are looking for an exit strategy due to health reasons, rent-to-own will not necessarily alleviate your issues. You will still be the landlord, the property will still be in your name and you will still have responsibility for the property until such time in the future when title actually changes hands. 

I guess what I'm saying is that rent-to-own just for the purpose of avoiding RE fees is a big undertaking.


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## Dana (Nov 17, 2009)

iherald said:


> The issue to remember is not so much that in three years the value of your condo goes up, it's what if it goes down? The tenants wouldn't buy it, and you've lost the value of the property.
> 
> So, you have to make sure you compensate yourself for that risk through higher rents (the portion going towards the 'down payment'). One way to think about it is what down payment do you want to have in three years? 10%? If so, divide the purchase price by 36 and add that on top of the rent.


If the tenants decide not to purchase for the agreed upon price at the end of the tenancy, the owner/landlord keeps whatever downpayment and 'rent credits' have been paid over the course of the lease. This mitigates the risk to the landlord (somewhat) if the tenant walks or can't qualify for a mortgage. 

The flip side of this risk is that the property increases in value more than the agreed upon price in the contract. For example, if the condo is worth $100k today and both parties agree on a 6% increase due to appreciation over three years, the sale price would be $119,101.60. If the actual market value in 3 years is $150k, then the landlord/investor has lost out on potential gains.


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## atrp2biz (Sep 22, 2010)

This appears analogous to a call option on real estate, with two different strike prices. If the property is above the agreed upon price (strike), the option is assigned. If the property is below the agreed upon price (less the deposit), the option is left to expire and the buyer walks away.

To work out a reasonable deposit, what would be the implied volatility on residential real estate?


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## marina628 (Dec 14, 2010)

I have bought and sold 4 properties in past ten years using same agent. I have never lost sleep paying her 4% commission (2.5% to selling agent 1.5% to her)
and she has always priced my homes correctly and sold them in under a month.My last house was exception as it took 6 weeks but we got 99.5% of asking price.


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## munchkin62 (Jan 10, 2011)

*Thank you*

I have actually gone out, picked up and read the book by Mark Loeffler and it is quite interesting. I do understand the percentage you could lose if the increase in the market is higher than the "now" set price. I have looked at some other areas on this subject and the biggest thing is to make sure you get a large enough deposit so that is the long run the tenant will want to complete the deal at the end of the term and not lose the deposit or credit he has earned.
I like the idea of doing it with was that in therory, the new owners would be more inclinded to look after the property since it will be theirs, they will be less likely to miss or be late with payments etc.
The condos we have are getting to be too much work, the IRD we would have to pay to get out of our mortgages and the real estate fess would not justify selling the condo's the traditional way at the present time. 
If anyone else could suggest other sites or book etc that I could look over on the subject i would greatly appreciate it. Thanks for your input and help...have a great day!


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