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Selling Houses Rent To Own, is one of the Easiest Way to Make Money in Real Estate

Aug 17, 2007
Rent to Own is a creative selling strategy that allows you to rent and sell an item or property quickly and receive three income streams. Rent to Own has many names: "Lease Option", "Lease Purchase", and "Lease with Option to Buy", to name a few.

The use of the Rent To Own strategy has been around for a long time. Have you ever heard of RAC (Rent A Center)? It's a business that allows customers with bad or no credit, to rent New Brand Name electronics or furniture with the option to own it in a year or two as long as they make their payments on time and take care of it.

We'll use a Big Screen TV as an Example: The customer puts down a small payment, pays a monthly payment, and at the end of a year or two they have the option to pay off the Big Screen TV or return it back to store. Most people that have had that Big Screen TV in their house for the last year want to keep it. The best part is that the buyer will pay more than what the equipment or furniture is worth because RAC is taking a chance on them. RAC is trusting they will take care of the Big Screen TV and either buy it or return it in good condition.

Let's apply it to Real Estate; the buyers are for Rent To Own Properties. They are people with less then perfect credit, people who are self employed or maybe just people who want to try owning a house before they actually buy it. These people may not be able to qualify for a mortgage now, but over the next year or two you help them clean up their credit in order to become homeowners.

They are called Tenant Buyers (T/B). The reason they are called Tenant Buyers is because you have them sign a rental contract as a tenant and a separate Option to Purchase contract that will make them a buyer in the next 12 to 24 months. (An Option gives the Tenant Buyer the Exclusive Right to Purchase but not the Obligation). The real benefit is that you create three income streams for the property. Three steps explained:

1. Market your Property Rent To Own. When you find a Tenant Buyer, you collect 3% to 5% up-front money called a Non-Refundable Option Payment, which you record on your Option to Purchase Contract.

2. They sign a Standard Rental Agreement for 1 to 2 years, giving you a monthly cash flow, typically around $125 to $250 or more. However, it can be much more. It could be several hundred dollars depending on what the Market Rents are and what you can negotiate with the Tenant Buyer.

3. When the Tenant Buyer exercises their Option to purchase the house, at the price you had agreed on when the original contract was signed, you can make anywhere from $10,000 to $30,000.

Profits Explanation: Let's say you're doing a 60-Month sandwich lease option from a Motivated Seller for a $10 Non-Refundable Option Payment. The Motivated Seller owes $75,000 with a Monthly Payment of $750. (P.I.T.I.) Note: You do not need to do a sandwich lease - you can use the Rent To Own Strategy to sell any property you own or control.

You collect from the Tenant Buyer a $3,500 up front Non-Refundable Option Payment (You subtract it from the purchase price) plus $200 a month, monthly cash flow (No Rent Credits) and a $95,000 selling price.
You would make the following from the spreads over the next two years:

1. Rent: $200 x 24 = $4,800
2. Price: $20,000(minus closing costs)
3. Up front: $3,500
Total Profits: $28,300

If you negotiate five deals a year, you'll make over $140,000 from your investments in the next 12 to 24 months without all the maintenance headaches of being a landlord.
About the Author
Charles W. Moore, a U.S. Army Combat Veteran who began investing in Real Estate in 2001. Charles is the past Vice President of the Capitol City Real Estate Investors club of Columbia, SC and formed his first Real Estate Investment Co. in 2003. Charles is now a successful, Full Time RE Investor, Webmaster, Speaker, and Author. For more detailed information on Rent To Own Real Estate go to: www.Rent2OwnExposed.com
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