What type of financing is this called? Is it legal?

[Christopher McGuire]

I'm not sure the technical words to do what I want to do but I'm hoping you guys can shed the light (as always).

I want to sell some of my rentals through some kind of owner financing or a rent to own type deal.

What is the best way to structure this? I want to get a down payment and monthly rent for a 5 year period while the tenant is responsible for repairs and maintenance. I know that if it is a "sell" then I would have to foreclose which is an expensive and time intensive endeavor. But I was hoping to structure this and after they finish their payments I can just hand over the deed.

Is this legal? And if it isn't, what is the most profitable way to do this?

[Joe Villeneuve]

@Christopher McGuire 

You are describing a lease option contract.  First, the most important thing about this type of contract is it is actually two contracts...a lease, and an option.

1 - Lease:  Typical Lease.  Lease it to the tenant just like you would otherwise.  Don't make it a 5 year lease though.  Make it a series of one year leases that have to be signed 2 months before the end of the current lease.  That gives both of you an out if you or your tenant decide either of you want out.  You don't want to be locked into a tenant for more than 1 year at a time.

2 - Option:  This is a contract that gives the buyer (tenant) the right to buy the property at an agreed upon price over a period of time...the agreement has a "shelf life"...usually 1 year, but again don't give a 5 year option.  You can give a series of 1 year options with an escalating price per year.

Important point:  DON'T CONNECT THE TWO CONTRACTS.  KEEP THEM SEPARATE. 

This is a very simple overview.  It is more involved and before you enter into it you should get a better handle on how Lease Options work.  My suggestion is to do a Google search for Wendy Patton.