How to Sell Your House as a Rent to Own

If you own a residence and have any interest in either selling or leasing it at some moment in the future, listen carefully because what I’m about to share with you could introduced tens of thousands more in revenues in your pocket.

It can also almost completely eliminate all landlord headaches. Plus, right now there is a huge opportunity to apply this technique in today’s market

Three Ways to Turn Your House into a Cash Flowing Machine

This was the title of a previous video in which I describe principles of offering a rentto own on a single household residence.
Judging by the feedback, numerous beings had never heard of this before. Now, examination, I didn’t invent this.
This has been around for a long time. Sometimes it’s called a lease obtain, or a lease obtain option, or a lease option, but the reality is offering the owned on a hire to own can be incredibly advantageous.
So many questions came, and so many beings asked me to shoot a video specifically about offering a hire to own, that here it is. This is the official video from me on how to sell your residence on a hire to own.

Why Rent to Own?

Reason Number One: More Money

When you furnish a rental as a rentto own, you first get what we call an up-front option remittance.
That remittance can be anywhere between three to five to ten thousand dollars or more up front.
That’s nonrefundable money, entailing they introduced the money up, and I’m going to go into greater detail in a moment on exactly how this thing drives, but they’re going to give you up-front money that’s nonrefundable.
That is if they don’t buy the owned you get to keep it. That’s a thousand dollars up front.
If you’ve ever been a landlord before, if you’ve ever gotten a deposit, it doesn’t mean you can use that accumulation.
Sometimes you’re wishing you are able, but you can’t. With a nonrefundable up-front option remittance you can because it’s non refundable.

Not all the time but in some cases your rental proportion can go up.

That has to do with give what’s called rent credits, which we’ll get into in just a moment.

Increased Sale Price :

Perhaps the biggest one of all is that you can have an increased sale price, so increased rate, and here’s the key , no fees .
When you sell on a rent to own, you don’t have real estate agents implied, and gaze, six percentage is a lot of money .
Especially if we’re talking about a three hundred, four hundred, five hundred thousand dollar house. That’s a lot of coin .
No fees, and usually you can sell at the top goal of what it’ll appraise for. That’s key .
If you can sell it for the maximum it evaluated for, sometimes that’s more than it would sell on the open market .

Reason Number Two: No Landlord Headaches

When you’re a landowner, and many of you watching have maybe been a landowner, or talked to somebody who has, you have this fear of maybe changing or fixing toilets at 2am .
With a rent to own, since the person is going to become the owner, you acquire the tenant fix everything .
Why can you formation that kind of plan? Because they’re going to become the owner .
You can say,” Look, “youre just” labouring yourself into what you’re going to be shortly, and that is the owner of the dimension, so you were supposed to get used to these acts like fixing toilets because now you’re the owner .”
For them, since they’ve got a locked-in option rate, they feel like they’re contributing to their own home. Right ?
They are not quite as frustrated by determining the hot water heater or those sorts of things .

Quick Little Caveat

Landlord and Tenant Act may usurp this, and that’s happened to me before when a HVACwent out. It was all because they never changed the filters for two years, but long tale short, I had to fix the HVAC because of the Landlord and Tenant Act. All right, so it’s pretty much no headaches, but certainly, there can be a couple of extenuating circumstances.

Number Three: Huge Opportunity Right Now

The largest potential home buying population are millennials .
Those are people the hell is out of college right now, they are in their twenties or thirties .
The millennials, that entire generation, that twenty-year brick of people is a huge potential home buying audience .
Get this, fifty percent can’t qualify for a loan .
You think of all those millennials that are getting married, they’re having girls .
Now, sure they may have leased in the past, but now their life is changes .
Now they want that single lineage home with that lily-white picket fence .
Fifty percent of them can’t even get a loan .
This rent to own is for those people. This is this huge ocean of opportunity .
If you put out, and I will talk more about these rent to own signalings there in a minute, you put out a rent to own signed, you’re going to have the phone ringing off the hook .
You have to send it to a voice mail. That’s how many calls you’re going to get .
Humongous opportunity, and right now is the time because there are so many people that fit into this category the hell is perfect for the rent to own .

A Giant Opportunity

Some have asked me on my apprentice unit, they said,” Phil, are you sure you want to tell everybody about this? This is a huge opportunity, but you often keep your best tips to yourself. You don’t tell them on these free videos .”

Option agreement:

this is a separate certificate .
This is going to stipulate what the price is, and it’s also going to stipulate, in a number of cases, what those rent credits might be .
What are rent credits ? What they just is when the person makes an on-time rental payment, a portion of that rental payment goes towards this rate .
The interesting thing, of course, is your upfront sum .

Upfront

Now, the upfront is what pays for the alternative .
In other statements, you’re not committing the option to buy away free of charge, just like a owner doesn’t allow a developer to get an option agreement on their property free of charge .
The potential, we call them a renter buyer, this hire to own person is going to pay you for this agreement of an option .

What’s This Price Going to Be

This is going to be the maximum it will evaluate for .
It actually has to evaluate for the amount you’re offering because they’re typically going to be get a loan .
We’re not asking for you to sell the property for more than appreciate .
We’re telling you to sell it for the maximum it can be valued at .
That can be done through comps. I have other trainings and videos on that, so alternative agreement is distinct from rental agreement .
What ends up happening is if the tenants don’t salary, this is the document that you bring to courtroom to eject them .
Then, this is the document that stipulates that this amount is nonrefundable, so if they get kicked out, they likewise lose their alternative money as well .

Ethics

You know? Some people have asked me,” Phil, the ethics of this ,” since they are look to me from an ethical standpoint and say,” Well, you do this real estate business right. How do you feel about the ethics of an option agreement and a rental agreement whereby if they don’t pay then you kick them out ?” The first thing is this, what happens when you get a bank loan? You put down a down payment, right? What happens when you don’t pay the bank? They foreclose. Do they give you back their down payment? Of track not, right?

First and foremost, this alternative agreement is truly a good deal for them. I usually lock it in for, simply real quick, I lock it in for two years usually, but you can lock it in for longer or shorter. That signifies if the property goes up two years from now, then they get the benefit of that because the rate got locked in when they firstly moved here, so they get a pretty darn great deal. Right? I think it’s fair on both sides, but looking, if they don’t paid in full, they’re going to get kicked out, and they’re going to lose their up-front money.

Most Won’t End Up Buying

Now, another thing about this is that the vast majority of people do not activity their option to buy. I’ve been asked that question as well,” Phil, aren’t you simply gambling on people to misplace ?” Not at all. I want them to buy because if they buy then I’m selling it for the max sum I can sell it for, and I don’t have to pay any real estate commissionings. I want them to buy, but if they don’t, I’m okay too. I don’t lose money there as well. No, this is no longer unethical. This is great; I’m giving them a great opportunity. Now, if they don’t take advantage of that huge opportunity, that’s their own darn fault, but I’m at least committing them the opportunity.

Rent Credits

The nice thing about these rent credits is that it helps them build some equity, if you will, because it’s paying down this price .
If you have been able should be considered this, if the price is a hundred thousand here, and then they put down 5 000 as their down payment, well , now all they really owe is ninety-five, but also, if they’re making lease credits on time, let’s “re saying you” give them two hundred dollars a month, that’s twenty-four hundred dollars a year .
After two years that’s forty-eight hundred. That’s almost five more thousand dollars they’ve built in equity. That’s absolutely fantastic for them .

Upsides for Them

In most cases, what’s ending up happening is at the time in which they activity their option to buy, that’s where they’re going to get a loan .
They’re going to get some sort of a loan to compensate you off, and compensate everything off, because you’re not going to be holding on to this and rendering them this lease credit for the next thirty years .
What your doing is your rendering this period of time in which to get their credit right, get their undertaking situation right, all those things so they can actually get the loan they want, and they’ve been building equity, or at least some equity, all along the way .
That’s the 101 of the lease to own. You’ve got a rental agreement and you’ve got an option agreement .
That option agreement is going to stipulate how much, and then how much per month could go towards that .

Real Quick Tip

Rent credits arnt allowed in every state. You have to look at your laws. In the circumstances in which the lease credits don’t work out very well because the magistrate may argue, or the case law may argue, excuse me, from a magistrate, that any time you do this rental with option agreement that it could be considered you’ll operate on installment marketing, or on proprietor financing if you give these lease credits. Then instead, don’t offering lease credits as in when they first move in that every time the payment is on time, am saying,” Look, if your pays are on time ,” you just go ahead and give them this lease credit when they firstly keep it moving. You can always do it that way too.

Advanced Tips :

Number one: Tenant purchasers, as I call them, are monthly payment sensitive, so simply because you’re giving them this great opportunity, they don’t always do the math that the monthly payment “re the same” sum that it “wouldve been” if they were getting a mortgage.

They look at it as renters, and so they’re going to compare the math to what it costs to lease. Build sure you don’t to continue efforts to overprice the monthly payment .
The only style you can get away with that, as I mentioned, you can sometimes increase the rental rates, is that if you give rent credits and you say,” Well, okay, if you do a thousand dollars a month, then you will get a hundred dollars going towards your lease credits, but if you go to eleven hundred a month, then I will go to three hundred in lease credits .”
You might say,” Wait a hour, Phil. You moved up by a hundred dollars, but here you moved up by two hundred .” I sure did .
Why I did that was in most cases, statistically they’re not going to be able to actually close on the belonging, so I can heighten the lease by a hundred and still make out better by offering to give them three hundred in lease credits because they may never take advantage of this .

Now, again, going back to the ethical issue, I’m giving the opportunity of a lifetime, just because they don’t are benefiting from it is their own fault. I’m not gambling on them to forget, but I am seeing that in most cases, statically, they’re not going to follow with their option to purchase, so I can increase the rental income by a hundred bucks, and then offer them … The reason why they’d take this additional, even though they’re paying a monthly payment sensitive, is because I’m giving them so much more of a lease credit. Build feel? Okay.

Number two get good legal help.

The questions is not that this has any problems from a legal standpoint .
I represent, you have been able lease a property, and you can sell a property with an option to by. That is so basic to real estate .
The questions to question whether, when you have an option to purchase and a rental agreement at the same time, does that spill over into being an installment auction, and if so, the reason why that would be a problem, number one, is perhaps if it runs into those constitutions related to attaining sure you handle your owner financing properly. I’ve got a whole video on that .
That’s a relatively new principle, but the bigger difficulty is if you ever tried to kick them out since they are not compensating you. Then you’re trying to evict them and the evaluate might say,” Well, wait a hour. This is an installment auction. This needs to go through foreclosure .”
Get good legal help to make sure. In most cases, if you’re doing a rental agreement and policy options agreement, you don’t have this difficulty, but I’m not giving you legal advice, so retain that in intellect .

Number three is this, I had talked about earlier how you have to make sure you send all of your traffic to a voice mail because if you don’t you’re going to get so many calls.

How do you get those calls? You can get them from a CraigsList ad if you run a CraigsList ad for lease to own, or signs .
Let me indicate you a signal. This signal right here. Right there. Can you see that? That’s the signal right there. You do that handwritten signal, you apply that up all over the place, any where in and around and near that property, you’re going to get the phone ringing off the hook .
Hand written is the key. Don’t go to some professional looking one .
Now, this one, this is actually a hand written font. I didn’t handwrite that, but it seems hand written .
I guess count three is send a voice mail so you have some sanity. I’m telling you, you’re going to get so many telephone call you’re not going to believe it. Transport it to voice mail .

Rent to Own Pitfalls

Choosing Unwisely

So I’m going to say a bad tenant purchaser .
I have a great video on what every landowner should know about property handling .
The main rule in the whole video, I’ll shortcut it for you, is choose your renters, or in such a case tenant customers, wisely .
You’ve got to research their situation. You’ve got to look at where they live now, where they lived before, talk to the previous landlords .
Heck, even drive by where they live. That’s a great way to see the style they’re going to treat your property, is the style they’re treating their subsisting property .
Do research on the employment opportunities .
Do all kinds of things to make sure you got the right person in there, because once you move them in, it’s a lot harder to get them out of there .
Number one is a pitfall is a bad tenant purchaser .

No Legal Help

For illustration, in Texas, in the state of Texas you can’t to a lease buy for more than six months .
Make sure you know your substance. Get legal help to make sure that you’re applying this correctly .
It’s powerful, but it also can be hazardous .

Low Down Payment

If you abide about a thousand dollars, which is the same as it would be if someone was putting a deposit on a normal rental, for your nonrefundable alternative pay, well then you’re probably going to run into a problem because this person won’t be able to afford the monthly remittances .
These beings are trying to become homeowners, so “youve got to be” selective from a fiscal attitude as well .
Do they have the money to have the wherewithal to be a homeowner? Being a homeowner is expensive, so you’ve got to make sure you chose wisely, both from the perspective of them being a renter, likewise how much they’ve got available to put down .
If you don’t sell very well, you put up one sign and get one phone call it’s your own fault. You’ve got to sell heavily to get the phone calls to get the few people that have a whole lot of money to put down, the three, the 5, the seven to ten thousand dollars down, because often periods that’s a lot of money to them and they’re less likely to walk away from that or induce problems .
Not always; not always the case, but usually “the worlds biggest” the down payment, the safer it’s going to be for you. Just like a bank. Banks like to have twenty percent down, right? Why? Because they’ve seen over duration, “the worlds biggest” the down payment, the better the borrower is going to be .
That’s how to sell your residence lease to own. As you detected, it can be incredibly profitable, it can reduce landlord headaches, and there is a huge opportunity to apply it in today’s sell, but you’ve got to do it cautiously with the right legal help to make sure you have all of the details tied together .

Thanks so much for watching. If you’ve got any questions, please introduced them down below here. I try to carve time out of my schedule to rebuttal the remarks and interrogates. Thanks so much for watching. I’ll see you on the next video.