Potential tenant was to Rent to Own

[Eric Mcginn]

I have this great clean little 1bd 1ba SFH I'm closing on a nice street in a so-so neighborhood in a very expensive county. It's the most affordable house in the county at the moment to my knowledge and I've placed an ad for a reasonable rent which is receiving lots of interest.

I have several excellent options for potential tenants lined up. 
One of which is interested in a “rent to own” situation. Their income more than qualifies them as tenants but they are young with limited credit. 

I was surprised by this inquiry and hadn’t considered it before. 

What are the pros/cons? 

Purchase price is $140k. Rent is set at $1500 with tenant paying all utilities. 

[Ashley Noethe]

As many have said, it all depends how you structure the agreement, that will make or break whether it makes sense. Often times a nonrefundable down payment is collected which holds the buyer more accountable to their word. Generally, the buyer is also responsible for maintenance. In terms of appreciation, you can account for that in your final purchase price in the contract. Lots of options. We are doing a lease to own with a property we recently finished renovating - we collected a $500 application fee and will be collecting a $10,000 down payment. You would be surprised how many different situations there are that put people in a scenario where they need to lease to own for a while before obtaining a loan - it is not necessarily just people who are financially irresponsible. The biggest thing to consider is if you are up for taking the proceeds a few years down the road and having to find a new property to invest in rather than sitting on this one for longer. If that tenant backs out of the option and moves out, you then replace him/her with a new tenant and are in the same boat as you would have been doing a long-term rental anyway.