Rent or Rent to Own - Posted by Tony

Posted by Tony on January 21, 2008 at 05:20:39:

Some of the timber could possibly be sold. I’ve made a few contacts.

Rent or Rent to Own - Posted by Tony

Posted by Tony on January 19, 2008 at 19:57:03:

I recently bought my 1st MH/land deal. 2001 DW 3/2 with 3 acres. I got this via foreclosure for $35K via (home equity). Land value estimated at 40-45K.


  1. Cash Sale: $60K (may take a while),(short term cap gain)

  2. Rent to Own: $69K, 5% down Payment, 30 year term, 8% rate

  3. Rent: $500.00

I have a buyer in place for option #2. Looking for feedback to support/not support this plan. Of course its not as good as cash but it does cash flow and I guess I could always get it back if the buyer can’t complete the contract.

Thanks for the help.


Re: Rent or Rent to Own - Posted by Sailor

Posted by Sailor on January 20, 2008 at 09:12:34:

I do L/O, but I charge a lot more than 8%. I also charge a $35 “paperwork fee” any time I have to do a contract.

Why would you sell the land? I would only L/O the unit & rent the land so that even if the buyer followed through, I’d still have rent on the land. Renting the land also gives you control over how it is maintained. If buyer doesn’t keep it up you can take over the whole thing.

If your property perks, you could also add more units to maximize your return on this investment.

When I do a long-term contract w/a small down I also get annual payments from each tax return.

You can start w/a low interest rate, & write your agreement so that there are future increases. Don’t make it a predatory arrangement, but it is reasonable to expect that a buyer would be able to afford slightly higher payments as time goes on. I find 8% to be extremely low for long-term on a used trailer w/low down & probably poor credit.

Remember, it is a rare MH buyer who actually follows through & pays off a unit, so calculate your return not just over the long haul, but for a 1-2 year term. If a buyer comes in w/only 5%, are you really making $$$ if he/she leaves in 6-12 months (especially if you have to make repairds & re-market). I’d calculate several different scenarios, but fortunately, you probably got in low enough to make some learning curve errors.

What is your home equity $$$ costing you? Remember, it isn’t just the interest you are paying. I don’t think 8% gives you enough of a spread, especially since you are tying up your equity so you can’t invest it elsewhere.

I’d definitely check on subdividing your land or setting up additional units. You have an asset & need to maximize it. Your buyer doesn’t need that much yard to mow.

Good luck!


Re: Rent or Rent to Own - Posted by Dr B. (OH)

Posted by Dr B. (OH) on January 20, 2008 at 07:22:43:

Sounds like 3 nice options. Which are you most comfortable with? With a qualified buyer in hand, it would certainly seem EASIER to go with #2. But if you desire to have a rental, then rental it should be.

Given that you have options, option #1 would be the worst choice in this buyer’s market, IMHO. Even if you sell it cheap enough to walk away with a net of $10-15K, you will have lost the cash flow and equity it will gain when the market returns in the usual 7 years.

Additionally, this is on 3 acres. Can you survey off a portion or two, sell as raw land or develop with more singles or doubles?


Re: Rent or Rent to Own - Posted by Tony

Posted by Tony on January 20, 2008 at 08:45:27:

Thanks Steve.

I don’t have a buyer for option 1 so lets rule that out.

I see the following advantages of option #2:

  • 8% interest as a big plus over straight rent
  • Buyer responsible for repairs
  • Buyer pays the taxes and insurance.


  • Some day it may be all his but for the next 30 years atleast I have a decent note for income.

Are there more disadvantages or risk that I’m not seeing?

I’m a little confused of late with the contract side of the difference between a Lease Option and a Rent to Own. I understand the fundamental difference (term, no owner fianance) but I can’t seem to find a contract that supports a Rent to Own format.

Is this because no one does them or they just modify the Lease Option?

Thanks for your help and advice.


Re: Rent or Rent to Own - Posted by bill russell

Posted by bill russell on January 20, 2008 at 11:58:45:

Tony, Florida has a specific Rent To Own classification when real property is involved. L/O is easily understood in real estate terms. RTO contracts vary from state to state on personal property from wheels for cars to diamond rings for fingers to storage buildings for a laundry room in a trailer tycoon’s little bidy trailer park, and in the end they simply boil down to being a lease with the option to finish the payments and then own the property, and not until then, unless, of course, there is a buy out option before then. It’s all in the laws of the dirt the personal property sits on, and the RTO laws on personal property, and the laws on RTO’s in real estate (if any) and blah blah blah. Listen folks, it’s all in the contracts you can get someone to sign! A wrapped Contract For The Sale Of Real Estate works best here for maximum leverage and safety on real estate, and an RTO on the dwelling unit gains the best return with the smallest costs. RTO’s require no FORECLOSURE procedures. That’s two grand!!! That two grand could be putting a portable building on the same lot and bringing in 88 dollars a month for the next five years. grin

Re: Rent or Rent to Own - Posted by Tony

Posted by Tony on January 20, 2008 at 15:01:49:

Is RTO the same thing as owner fiancing in your mind?


Based on your input and a chat with a friend, I’m planning a few changes:

I collected a $500.00 down-payment today towards the required $3000. The contract is in the works so I still have some flexibility. However, we verbally agreed to the terms I stated above last night. We are planning to meet next weekend to finalize the deal.

Here is what I plan to do:

Start with a 12 month L/O.

  • Lease for $500.00 per month with extra each month until I have $5000 as a down-payment.
  • Offer the property for purchase at the end of the 12 month term for $60,000.
  • If the tennant can’t cash me out but has paid his rent on time, I will offer a 1 year extension or we could roll to a owner finance plan as stated above.
  • How much if any of the lease payment do I offer to count against the sale price at the end of the 12 month term?? Is the answer different if he cashes me out compared to if we roll to owner financing??

Feedback from postings…

  • 2 of the 3 acres is fairly steep. Sub-dividing is really not an option. The property is mostly timber.

Re: Rent or Rent to Own - Posted by Gary

Posted by Gary on January 20, 2008 at 22:15:38:

OK next question. Any saleable timber on your parcel?

Re: Rent or Rent to Own - Posted by bill russell

Posted by bill russell on January 20, 2008 at 20:06:37:

Tony that’s what it amounts to on many contracts, 100 percent financing. Good luck, btw, there are many homes that would fit on those steep woodlands eh.