We’ve all been there …
You have a few rental properties and you really want to sell one soon so you build more cash in your bank account.
You tried selling your property last year, but it sat on MLS for months because the real estate market was slow.
And when someone finally puts in an offer, it was almost insulting looking at the offer price.
Does it feel like a big challenge to sell your rental property in a slow real estate market?
It doesn’t really need to be so hard. You’re about to learn one of the most effective real estate investment strategies that boosts your cashflow, attracts better tenants and gets your property sold.
How Rent-to-Own works
The primary indication of good real estate investing, in my opinion, is whether everyone involved benefits. This can happen in any type of ethically executed strategy. For example, in standard buy-rent-hold investing, the goal is for the property owner, the investors and lenders, and the tenants all to benefit.
The benefits to all parties are potentially even greater in well-executed RTO investing. In addition to having a clean, safe place to live, the tenants complete the RTO term as home-owners with improved credit. It’s a very high profit, compared to standard buy-rent-hold, so investors and partners are very happy, too.
Did you miss the Rent to Own: Smart Person’s Guide Part One – Read it here.
Why Tenants are Attracted to RTO
Rent-to-Own deals are designed to solve two specific tenant problems:
Insufficient down payment. Note that some prospective RTO tenants do have enough cash to cover the down payment, but can’t get a mortgage for one reason or another.
In the absence of an RTO investor, the tenant must wait to save up the down payment, and work towards a better credit rating. The RTO investor helps in three ways:
By giving the tenant the opportunity to start building equity in advance of his or her own ability to purchase a house
By helping the tenant be disciplined in putting aside a specified amount of savings towards their eventual down payment
By helping the tenant repair their credit. Most people have no idea how to do this themselves.
The exact structure of RTO deals varies quite a bit among investors doing them, but most include the following elements: