I started real estate investing 12 years ago, but it wasn’t until 8 years ago that my real estate investing business took off. I started like many others without a clear plan or strategy.
Most of us invest in properties because we want the cash flow that comes from it.
Often dreaming of quitting a day job to become a real estate investor. We buy one or a few properties, but it takes time, and can be a slow process.
This is where becoming a sophisticated investor and knowing several strategies can speed up your progress dramatically. Before I had a good strategy, I had a very hard time asking friends and family for money to joint venture with me on real estate deals.
Benefits of Rent To Own
8 years ago I learned of a strategy that seemed too good to be true… there were so many positives, and very little negative about rent to own as a real estate investing strategy.
Here is why I absolutely recommend learning rent to own either as a beginner or to add to your list of strategies.
- Raising capital is easy when you can accurately predict returns your deal produces
- Know the selling price of the property before buying it
- On-time cash flow and no vacancies
- Predictable mortgage pay down
How Rent To Own Deals Works
Most of these rent to own deals are 2-3 years long, which makes them fairly short in the real estate world. The properties sell at full retail price, and without a realtor. This all makes it very attractive.
Not only are the results of the rent to own deal accurately predictable, but you also get a large upfront deposit from the tenant-buyers.
Each month the tenant-buyer pays you rent, and pays an extra amount to their deposit.
This is for them to use to buy the home at the end of the deal, and is otherwise, non-refundable.
That means that if they fail to purchase the home, you get to keep their deposit, and everything that’s been added to it. It makes for a good budget in case you need to buy time to either find another rent to own buyer, rent the home, or just sell it.
Otherwise, they buy the home as planned, and you make your expected profits! It’s hard to lose with this strategy.
Better Than Rental Properties
In my own portfolio, I have a mix of buy and hold, and rent to own properties. I’m learning very quickly that I much prefer managing rent to own deals. Here’s why:
- The tenants pay their own utilities
- The tenants pay their own maintenance
- The tenants often will make the property nicer
No more clogged toilets in the middle of the night phone calls!
No more unpredictable maintenance costs – the tenant-buyer’s treat the home like it’s already theirs!
90-Day Checkups for Success
The only extra time after a rent to own is set up is in my 90-day check ups.
These quarterly meetings are one of the reasons my rent to own deals have been so successful.
We meet at their house, and go over their budget, how much their deposit has grown by, and their credit. We help our clients stay on track, so they will be successful with the home purchase.
Create Predictable Income
Now with a rent to own system in my real estate business, I am making very predictable income. I used rent to own investing to know ahead of time my future income, before I left the workforce to do this full time.
It’s one of the easiest strategies to use to get started, and is also a great way to sell a property at full price for those who already have experience and a portfolio.