When it comes to rent to own investing - when you are buying on a lease option - I tell my students to follow three basic steps in writing a proposal or offer to the seller:

1. Keep it simple

2. Do your homework

3. Determine your offer

Keep it simple - Sometimes we get too formal.  We want to make sure we have the proper letterhead and business cards and look official up front. We feel this gives us the legitimacy a seller expects.  However, counterintuitively, there are times when too much polish may in fact be detrimental to us because the seller finds it impersonal.  Save the formal documents for after the deal is negotiated, when it needs to be drawn up in detail.  That's how you keep it simple in rent to own investing.

Do your homework - you can't put together a proposal without first doing some research when buying on a lease option. You can't base your offer purely on what you think the home is worth; you must incorporate the comparables as well.  Comparables are key in rent to own investing, if you don't get the price right you won't be able to complete the sale on the back end and get paid.

Determine your offer - When buying on a lease option I usually include terms that will limit my risk.  One approach is to include a clause that says my lease option can be terminated within 60 days with written notice to the owner.  This provides an agreeable exit to problematic transactions.  Another method that I use even more frequently is to make the start of the lease option contract subject to finding a tenant-buyer.  This significantly reduces your overall risk and avoids having to begin funding monthly payments before you have your own funding source in place.

Remember rent to own investing doesn't have to be that complicated - keep it simple, do your homework and make your offer.

When it comes to buying on a lease option you need to find motivated sellers.  What makes a motivated seller?

A variety of circumstances and situations in people's lives can make them need to sell their home.  These can include a job transfer, bankruptcy, foreclosure, upgrading to a bigger home, or a number of other reasons.  For real estate investors buying on a lease option it is crucial to buy homes from truly motivated sellers - sellers who have an extra urgency, usually financial.  You can't get a good deal from an unmotivated seller who has no pressing reason to negotiate or give in on any part of a transaction.

There are different degrees of motivation and different reasons people need to sell their homes, but overall there are two basic categories of motivated sellers:

1. Desperate and distressed (bad debt) - someone in trouble financially, behind on on payments, going in a bad direction, lost their job, foreclosure, etc.

2. Not desperate or distressed (good debt) - someone not in trouble financially, not behind on payments but motivated for other reasons: two house payments, inherited a home, burned-out landlord, job transfer and so on.

When it comes to bad debt you want to consider subject to investing, these types of motivated sellers are good fits for subject to investing.  However, when you are buying on a lease option you want to focus on the sellers with good debt.