Look at it this way. You are providing a solution right now for the seller and they do not have closing costs to pay until you decide to exercise the option. Also, as you say they may not be able to afford to pay a commission if the house is worth $100K with a mortgage of $98K on it. A lot of things are going through a desperate seller’s mind.
Some people cannot save for whatever reason. Look at this from a different example. A credit risky person needs a $1000 sofa. They will never be able to save the money to come up with a partial payment and they do not have a credit card. However, they can go to a rent to own store and with affordable monthly payments for a long time finally own that sofa. It may cost them $1800 or more and they might not be able to make all the payments but it is the only chance they will have to own a sofa.
In other words if the tenant buyer had a choice they would not need investors to l/o a house to them. A lot of people want to try out a house first before committing to buying it. There are a lot of reasons.
I have some doubts myself about the L/O business. Please kindly solve my puzzle…
In L/O, why do the seller just don’t list the house with an agent? some says because of the little equity in the house, that agent will have no profit in it. But if we L/O it for the seller, we still won’t pay what the seller is asking, because we have to make a profit also. So, what is the advantage for the seller to have it L/O from us than listed the house with an agent?
After we L/O the house, what make our tenant/buyer want to L/O? some says they can pay the down payment in installments, but why don’t they just save the down payment first, and buy another house? They have to pay the rent anyway with the L/O? The only advantage I see is if we gave them credit towards the down payment from their rent.
Is there other factors that attract people to L/O from us?
What makes the tenant/buyer willing to pay the higher closing price than what we have to pay the seller because the tenant/buyer will know that we sublease to them, and we are making a profit when we sell the house to them.
