RentToOwn-HouseFinder.com - rent to own help please?

rent to own help please?

Hi my question is for investing in rent to own properties. I find distressed sellers willing to sell me the property, to do a lease option with tenant-buyers. But they are priced very high around 300k/400k, I find tenant-buyers willing to rent . But the rent is lower than the mortgage for the property. Does the owner of the property pay rest of the mortgage? Or is the rent suppose to be at same as the mortgage. Please help me thank you

Public Comments

B uyer beware
Depends on how much risk you are willing to tolerate. Who is responsible for the property in the lease to buy situation. If they could afford the full mortgage, then why lease from you? Why not just become a private mortgage provider. You float the note, and own the title until the mortgage is paid?
Everything depends on what the agreement between the tenants and the owner of the house is. It can be done many different ways. First you need to agree on the price of the property. Then rent payments can be the amount of mortgage payments and EVERYTHING that the renter pays, goes towards the purchase. Or the rent payments can be lower and the owner pays the difference, but 80% of what renters pays goes towards purchase (I used 80% just as an example, it can be 50% or 75% or whatever.) To make the long story short, you have to have a contract stating who pays what and how much money paid by renters goes towards rent and how much towards future purchase. EVERYTHING AND ANYTHING CAN BE NEGOTIATED. Do NOT do this contract yourself. Have a Realtor or even an attorney do it. If you use a Realtor (and you are a buyer) it will not cost you anything, the seller has to pay the Realtor. If the seller refuses to pay, then pay an attorney (or pay the Realtor yourself) but do not do it alone. You'll get into a big mess.
The way my Rent2Own deals are structured, my tenants are able to take the Mortgage Interest Deduction which allows them to make a higher monthly payment than market rent but makes their net payment lower. This doesn't even include the 50% of the appreciation they get at termination. Example: Let's compare the rent. Let's say in both cases it's $1,200 a month. If they don't have good credit and little money they are stuck renting. They pay $1,200 a month for 36 months they will pay $43,200 and all they will have to show for it is a handfull of rent receipts. In my deals they pay $1,200 a month and the same $43,200, but because of the equity share they get 50% of the net appreciation in cash at closing. Let's say that is $15k. Now, $43,200 less $15k = $28,200. $28,200 divided by 36 months means that their net rent was $782.33 a month. $782.22 from $1,200 means that in the my deals $416.67 of their $1,200 monthly lease payment is building them CASH each month towards their goal of home ownership.