Rent to own homes or lease options are beautiful tools with which to buy and sell properties. While there are too many variations to rent to own homes to discuss in detail, we will cover the key areas available for negotiation. When structuring your rent to own homes contract with the seller, it's important to understand which of these criteria is most important for them:

• Price
• Length of Contract
• Monthly Payments
• Option Credits
• Mortgage Buy Down – The principal adjustment
• Automatic Renewal Periods

By knowing which criteria the buyers of rent to own homes are most concerned with, you can create a win-win scenario by giving them what they want and getting what you want.

Rent to Own Homes - Contract Terms

As an investor, it's important that you have certain clauses in your rent to own homes contracts.

Typically, investors engage an option lease contract with the seller and then find a willing buyer for rent to own homes they don't yet own. As an investor, you don't want to be locked into leasing the home until you have an end buyer willing to sign a lease option contract.

In addition to the seller criteria discussed above, I usually include terms that limit my risk. One is a clause allowing me to terminate the lease option within 60 days with written notice to the owner. This is an escape clause for rent to own homes contracts in the event the owner is difficult to deal with or other problems pop up.

Another clause I use even more frequently is to make my obligation begin only after I have found a tenant willing to sign a contract for rent to own homes. This significantly reduces my risk because I won't be paying rent and looking for a tenant at the same time.

Here is another important clause to have in the contract. You want your lease option period to be slightly longer than your tenant's option period. You need to still be in control of the property when their contract expires.

One last clause to have included in rent to own homes contracts is a strong maintenance and repairs clause. The end buyer wants to be a homeowner and being a homeowner means maintaining the property. The end buyer should be responsible for all except the most expensive repairs.

Rent to Own Homes - Let the Cash Flow

Once you have both lease option contracts in place, you'll have a nice passive income stream for the length of the end buyer's rent to own homes contract. Obviously, you want to be paying less to the seller than the buyer is paying to you. You collect the difference each month while minimizing your risks.

By finding the tenant before you have to start paying rent, you can also collect the option contract payment from the end buyer. Use a portion of this to pay your option to the seller and you're in the deal for no money and actually walk away with some cash.

If you're paying $750 to the owner for rent to own homes and the buyer is paying you $1,000, you'll profit $250 each month. Even if $150 of the buyer's rent is credited towards a down payment, you don't need to be concerned because it should be nonrefundable if they don't exercise the purchase option.

Learn more about wholesale lease options and how to structure rent to own homes contracts by viewing my past webinar.

This entry was posted on Tuesday, January 3rd, 2012 at 8:52 pm and is filed under Lease Option Student / Rent to Own student, Lease Option Training / Rent-to-Own Training for Investors. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.