Rent to Own Tenant vs Normal Rent Tenant

[Adriel Hsu]

Hey BP, I need some advice.

I had done my first BRRRR deal, and I'm about $5500 out of pocket into the deal, and looking to get rid of the property within 5 years as I am trying to transition into multi-family eventually.

My Goal: Find an exit strategy for this property and recoup some cash now for another deal under contract.

I advertised it as a rent to own or a normal rental.

I have two potential tenants.

Tenant Option 1:

The first is a couple around 45 years old who have a small dog and no kids.  They are looking to rent-to-own and claim they really love the place. They have been renting at their current house for 3 years but it was too small for them.  Their combined income is overqualified, but The husband has a high 500 credit score due to a divorce and the wife a mid 500 score. I do understand low credit is a reason many do rent-to-own.  I would require to them to show me some plan to improve their credit, as I do want to sell the house.

They have clean background and criminal checks, but their landlord reference had mixed reviews:

No late payments the past 12 months, but there was an instance prior to that, but once she implemented a daily late fee, it stopped.  She also said they were a 4/10 on mowing the lawn and they weren't "as handy as a blue collar worker"so i'm guessing they call about repairs more than she liked.

However, she did say she would rent to them again if she had the choice., but it was a tad hesitant.

They are ok with my rent to own terms:

Sale price: $125,000

Lease option on a 2 year lease

Upfront, non refundable option payment of 5% of sales price

Monthly rent:
- $1275 with $5% rent credit towards purchase

Tenant option 2:

Two young adult (mid 20s) roommates. One is actually my co-worker so there is more of a trust factor of being a good person and I know she is overqualified on income and her roommate makes a decent wage as well.  No pets, no kids.

However they are simply looking to rent at $1250 a month and are looking for a maximum of a one year lease with renewal options.  Their current apartments, they only stayed for the 1 year and their previous apartments before that they only stayed the one year as well. They said they want to stay flexible in case they want to/need to move.

Still waiting on the credit and background report from the site to come in as I just sent it out a couple hours ago, but assuming they have great credit and a clean background and good landlord references, what should I do?

I like that Tenants #1 as they were in their last property for 3 years, and are very serious on rent to own, or at the very least a long term tenant and have the upfront cash for the lease option payment, however I don't want to be bothered with lots of phone calls and unsure if they can get their credit score high enough in 2 years to secure a loan.

I like that I personally know Tenant #2 and that they are just 2 roommates with no pets or kids and very qualified in income and on time rent payments.  However, I don't like the idea of them moving after a year, and having to show the house again and find new tenants (I absolutely hate showing houses).


What are your thoughts BP? Considering my end goals of exiting this property, Take a chance on Tenants #1 or go safe for the next year with Tenants #2?