How to Cover Your Butt When Looking for Tenants

How to Cover Your Butt When Looking for Tenants

Leasing your home to a tenant or rent to own buyer has been quickly gaining popularity because of the current real estate market. The main reasons of it becoming one of the preferred and fastest methods to sell your home is due to the lack of home buyers that can qualify to purchase your home and properties that are now valued at less then what is owed on the mortgage. So, home owners have their backs against the wall; with no way to sell their home through traditional outlets. Leasing to tenants or selling on rent to own terms have become a solid and smart option.

Providing a home to rent to own buyers that have poor credit history or are having a hard time qualifying for a bank loan can create a very positive and helpful solution to everyone involved. However there are some keys in finding a great rent to own buyer that will increase your chance of them purchasing your home.

Rent to own homes are great options with huge benefits for both the tenant and the home owner, but you should beware of certain pitfalls that could leave you the home owner SOL (Sh*t out of luck). The first important things to be kept in mind are that you want someone despite having credit issues can afford the home on a monthly basis as well as the end purchase price. You the home owner will have certain responsibilities, getting a down payment if approved, pulling credit report, criminal history and employment verification.

Getting a down payment in the amount of 3-5% of the purchase price is a must. For one it weeds out anyone that has no intent on improving their financial hurdles to purchase the home, second it helps equal out the risk. That down payment is non-refundable, that’s right… you can save or spend that money right away. Keep in mind that if they do purchase the home that down payment as well as any rent credits will count toward closing costs and or down payment.

Doing employment verification allows you to confirm that your tenant buyer has regular employment, which means that he/she has a steady source of income and can make those monthly payments. Make sure they have been on the job for at least 6 months. I also suggest referring them to a mortgage loan office so they can pre qualify them for the home, they will be able to give you a great estimate on how long it will be before they can buy and if the end purchase price is out of their financial reach or not.

Generally the length of time before they can purchase is from 6 months to 36 months. During this time the rent to own buyer is working on any issues that are holding them back from purchasing. During this period rent acts as revenue to the home owner and as a form of down payment on the part of the buyer.

It is also important that you check out for any criminal records, I make it a habit to tell them we do not or will accept anyone with a violent, theft or sexual criminal history.

Make sure that all the aspects of rent to own are clear before the deal is signed and make sure you save all paperwork and copies of the monthly payments. Rent to own homes are excellent for both the home owner and the tenant buyer, you can create a win-win solution by following these guidelines, or you can work with a tenant placement or rent to own placement company that will take you and the tenant buyer from start to finish.

Daniel D. Dawson