Posted by JohnBoy on February 11, 2005 at 20:34:17:
Advertising “Rent to Own” is OK.
Rent to own… - Posted by jake pitts
Posted by jake pitts on February 11, 2005 at 09:50:07:
If I offer a property on a “rent to own” basis and require a down payment (say 10% of purchase price), what are the chances a court would treat this as a traditional mortgage (deed of trust) and make me go through a traditional foreclosure process and give the renter/buyer the traditional mortgage equities?
Re: Rent to own… - Posted by JohnBoy
Posted by JohnBoy on February 11, 2005 at 14:48:38:
Extremely high!
Solution! NEVER offer anything in the way of a down payment! It’s the wording you use and how you structure the deal is where you can get into trouble with this.
Instead of down payment, use “Non-refundable option consideration”, “security deposit”, “rent” instead of payments, etc. Don’t say anything about tenant’s paying taxes and insurance. Everything should be just RENT. Use “tenant” and “optioneee” instead of buyer. Use “Landlord” and “Optionor” instead of seller.
Remember, you are not selling anything. You are merely LEASING the property and giving the TENANT an OPTION to buy, IF they so choose to exercise their option and purchase the property.
If the agreements look and/or sound like a “sale” agreement vs. a simple LEASE and simple OPTION agreement, then that is where you will have a problem.
Keep the term of the agreement for LESS than 3 years. Preferably only 12 month terms! No more than 2 years. Anything 3 years or longer has a high risk of being treated as sale.
Read up more on lease options to better understand all this before just jumping in blindly.
Great Advice…one follow-up… - Posted by jake pitts
Posted by jake pitts on February 11, 2005 at 17:57:07:
Great advice JohnBoy, thanks. One follow-up, if I do this lease option method, can I still advertise the property as “Rent to Own”? Or do I need to call a “Lease Option” which I fear most potential buyers will not know what a “Lease Option” is? Thanks in advance for your help.