PUTTING NEW HOUSE UP~RENT WITH OPTION TO BUY? Yes or No ?

Rent to buy: When a delusional seller meets an unqualified buyer. 

lovenyc,

For the property owner who does not care whether he/she rents the property or sells it, Lease-Purchase and Lease-Option are two viable marketing plans.

During your due diligence, prequalify the tenant/prospective purchaser as you would a tenant.  Then if you feel you want to consider leasing to the person, have them prequalified by a seasoned lender you or your agent trust to find out what needs to be done in order for them to qualify for a loan to purchase.  

After you enter into the l/p or l/o agreement, have them prequalify with the same lender every 3-6 months to see if they are on track to eventually qualify for a mortgage.

Best of luck

On the head, if your goal is a sale, now or in 1-5 years... terrible idea. if you are looking for a quality tenant who is planning to live in your property for potentially years untill they are "ready to buy" a very good hook.

you are first and foremost a renter, if these tenants go ahead and take a 4 bed and turn it into a 1 bed + great room, that is going to still be your problem to deal with. get your refrences, veiw their credit reports, do your homework. if you are satisfied that they will rent your home short term, paying the full morgage price, then maybe it is a short term solution untill you can find a buyer who can actually qualify to buy your home... and if on a longshot it works out, be shocked and happy! but dont count on it.

by renter i meant landlord; a person who rents out land:P

I know there is a lot of bad written on the subject. I did this with the home I purchased nearly 12 years ago. I had lived in traditional suburban homes my entire life and this home was nearly 200 years old and in the country. We contrated with the owner on a selling price and negotiated $200 additional renat to be applied as a credit at settlement. We had date specific deadlines to satisfy normal purchase contingencies in the contract. The contract was for one year and a purchase commitment on our part in 10 months. We closed in 11 months. We took it for a test drive and were happy. Granted our landlord/seller knew we had rented our previous home for 8 years and our then landlord hated to see us go. There are horror stories out there about renters, but then there are good ones too. Like any rental it is a crapshoot and doing your due diligence and contracting with them with date specific terms should help show their true intent earlier rather than later.

The same can be said about landlords, I've rented and I've owned a few homes being Military. I had some landlords that were great, and some that didn't seem to care about their property. As a owner the best things is checking their credit, as a tenant, keep the place the same as you found it and you will cover your butt!

This is what I'm hearing from friends. 

Keep in mind this property is a new, never lived in, single family home. 

"Most people looking at lease-to-own property are doing so because they have an issue with getting a mortgage loan from a traditional lender, but who are still looking to purchase property within the next few years...maybe. Often times, these potential buyers have a recent bankruptcy on their credit, a recent divorce, or some other major life event that makes them a high risk for a traditional loan, and also makes them short of down-payment money.  Risky and can be expensive."

You'll need

1)  Management Company to manage it.

2)  Accountant to make sure you understand tax and insurance requirements

3)  Lawyer to help you with your legal responsibilities of being a landlord. Advise you of your rights and the tenants’ rights and your states laws about leasing.

4) Landlord insurance
 

"The cost of damages to a home can far exceed what the damage deposit will cover. Many repairs are the landlord's legal responsibility, particularly those that involve health and safety. Being a landlord can be expensive, very expensive."

What I'm hearing and seeing is.....bottom line  ~ Don't rent.....SELL, SELL,SELL.  

You don't need a management comapny!  Please, what a waste of money!  Only use one if you own an apartment building with multiple tenants. 

I agree with the comments made about this concept.  Yes, you can go about getting someone into your property on a lease with option to buy, but in essence what you are doing is renting out the property and the renters are legally bound to finalize purchasing your house after a specific period of time.  It is sort of like the tenant is promising that their financial situation will be great as of a certain date in time...........it doesn't happen very often so it is risky in the sense that you could delude yourself into planning on having the proceeds from the sale as of a certain date, but instead you tenants that move out and leave your house in horrible shape. 

I don't want to be called a total naysayer on this option - but there are landlords that have to burn down their property after tenants move out.  Drug production in a home makes it toxic and it is going on alot these days.  The kicker is that it is doubtful if any insurance would cover a loss such as this since the landlord should not have rented the home to them. 

If you' re going to become a landlord for the first time, join a rental association (there is an annual fee but it is worth it).  They will walk you through the steps and forms necessary to screen.  Don't run to a managment co.  You need help to be legal and to protect yourself and your property.  Being a landlord is very very expensive, and alot of work.