When to Rent vs. Rent-To-Own

[Elliot Grochal]

Hey BP, I've got a 2 bed, 2 bath SFH that I am nearly finished fully renovating (new foundation, hvac, plumbing, electric, finishes, etc.). I'm planning to BRRR once complete and take out a large chunk of equity to allow me to find another one. By my research I think it will rent for $1500/mo as a typical rental. I've had a few investors tell me to consider putting the home up as a rent-to-own, or lease-to-own. Let's say today's retail value of this rehabbed house is $215,000. If I were to offer a lease-to-own option, what would you ask for down payment and monthly to make it more competitive than a normal rental? I am intrigued about the tenants having ownership so that the property is better maintained and I am less involved as a manager (hopefully). I ran a quick mortgage calc on that value house @ 215k, and came up with appx. a $1000/mo payment for 10% down and 4.75% 30-yr note, which makes me think keeping it as a $1500/mo rental is the better choice. What would you do?

[Jason Dillard]

Seller finance for same payment as you would rent for. Back into the interest rate. Remember, the buyer that needs YOU to carry, can't get bank rates. If they keep renting, they will be paying the higher amount anyway for same house. Plus when you factor in, down payment instead of deposit, and no repairs instead of paying for repairs, it's a no brainier for me.