What is so great about rent to own you might be asking? Well, since this is probably my favorite form of investing and one that I have used more times than I can count, I am the perfect investor to answer your question.

See the good old fashion strategy of straight rental where you put a tenant in a home and wait years for the the home to be paid off. Quite frankly takes to long to make any real money for my taste! On the other side of the fence with fix and flip there are lots of upfront expenses and risk while you are waiting to resell the home and make a big and quick profit. Which in itself causes a problem because those profits will be taxed at regular income tax rates since you did not own the property long enough to fall into capital gain status.

So it is for the exact reasons above I think rent to own investing is so great. It takes the benefits of both the straight rent and the fix and flip strategy and combines them to your advantage. Under the rent to own model you are able to collect an upfront and more important non-refundable down payment from your rent to own buyer. This deposit will be applied towards the purchase down payment of the buyer in a few years when they are ready to buy. But you never have to put that money out yourself. It just becomes a credit on the Settlement Statement when you close assuming the tenant actually buys. 

Additionally, you will be able to demand a higher rent than a straight rental, often several hundred dollars more a month than the typical rent. This too goes straight into your pocket. Again, the additional rent becomes a credit towards the buyers down payment in the future when they buy but you get the additional cash now! 

Your probably wondering how all these credits will impact your profits when the tenant buys. Well that is the beauty of this system. See, you know all the numbers upfront when you put the deal together. So you will actually lock in your profits the day you sign the contracts and through out the time you tenant is under lease with you, you will be collecting more money than if you were just doing a straight rent. I generally set the future purchase price between 5% and 10% above current market value per year depending on your location and the local market. 

The great thing about todays market and this system is that you can buy so cheap, you could be profiting more than your mortgage payment each month! Think about that. If your mortgage is $500 and the tenants are paying you $1000, your pull

ing in $500 each and every month on that house. When it sells in 2 to 3 years your going to get another big chunk of change! Not to mention the amount of people this program appeals to has never been higher than it is now. Think about it. All those people who have lost their homes in foreclosure can not qualify for a new loan now. In a few years they can and most do not want to just rent a house. They want a home they can call their own. That is want this investing model provides for them! 

Ok, I hear my ears burning! Your thinking yea but what if the tenant doesn’t buy? Then what? Well the truth is as the investor you make even more money if the tenant doesn’t buy. And more times than not they don’t buy. Now I believe in a win win situation so I think your goal and mine has always been to help the buyer in any way I could to make it possible for them to complete the purchase in two to three years. But if they don’t, the deposit and extra money they have been paying you is non-refundable and yours to keep. Of Coarse, your contracts need to spell all this out but this is the concept and how it works!

At that point if they don’t buy, I put another rent to own tenant in the house. Collect a second deposit and move on. On the other hand if the tenant does buy, I’m thrilled and I now go out and buy another house to put on my rent to own system! 

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