Rent to Own - advantages and disadvantages

Rent to Own - Pros and Cons

Rent to Own - advantages and disadvantages

 

Today we will talk about
Rent-To-OWN and Alternatively Lease-To-Own
And the initials RTO
Hi friends… Another post that gives you value..Round Four .. 1/3

So what is this? What alternative does this investor give me?

In the RTO agreement, where you rent the house to an ordinary person for a certain period of time, with the option to buy it before the end of the lease agreement (often an option of 1-3 years)

This investment strategy is quite similar to the buying and holding investment strategy
During the contract + option period, the property owner cannot actually offer the house on the market because of the exclusivity that the tenant has to purchase the house (usually, and depends on the specific contract).
This method is known as a method used by beginners because of its advantages:
• A separate payment for the purchase option at the rate of 2% -7% of the purchase price .. non-refundable
• The tenant pays a rent in accordance with the market price, in addition to adding another 10% -15% to a trust account each month, which will be used as part of the payment for the house… a kind of future savings. It should be noted that here too there is a possibility that it will be non-refundable and thus in fact there is excess income for the investor.
• Holding maintenance and repairs - such a tenant will keep better on the property because of the option and the possibility that he has to purchase the property, and in fact everyone wants to have a real estate asset. In addition, it is possible to float in the contract the costs of repairs on the tenant (at least to a certain height).
• The right to evict the tenant is still relevant and possible despite the option, due to the fulfillment of certain conditions such as non payment of rent and the like.
• There is a sense of confidence to the investor that there is a possibility to exit and sell the house to someone agreed upon in advance, in addition to save costs of brokering the sale.

Facing advantages there are also risks as follows:
• The tenant did not exercise the option and as a result should find another tenant, including sales expenses, as well as loss of chance of sale and exit from the property when we defined in advance.
• Because there is a tenant with an option, in fact there is an “alternative loss” and this is the option to sell at a higher price if possible in the market.

What is your experience with this method?
PS - Tomorrow we will talk about owner financing

Link to the original post in the United States Real Estate Forum on Facebook - Works on a desktop computer (To view the post must be members approved for the forum):
http://bit.ly/2IncK36

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