Helping Single Moms with Home Ownership- a rent to own model?

[Charlsi Kelley]

Hi fellow BPers-

Do you have experience with starting a non-profit OR with starting a rent-to-own program? If so, I would love to connect! 

A little background, my business partner @Sarah Kozlik , and I both grew up with single moms and saw the struggle firsthand. We have also both been fortunate enough to see the wealth building powers of real estate. When we formed our real estate business in 2021, we knew that our "big why" was always to be able to help single moms achieve home-ownership. We are getting more clarity on what exactly that may look like and have recently joined forces with two other amazing women who are aligned with our mission. One is a lender and the other is a developer and works closely in the affordable housing space. Between the four of us we have a solid team and shared vision- we just need some tactical advice on actionable steps we can take to get this going. 

Our vision is to start a non-profit that acquires properties and enables home-ownership with a rent-to-own model- which we have concluded would probably be the most efficient way to make the most impact. Here is the rough idea:

Step 1- Use a combination of grant $ and private funding to acquire the properties **ensure the mortgage is ASSUMABLE.*

Step 2- Tenant signs lease agreement with the rent-to-own clause outlining the details. They will have a mentor that will work with them and connect them to resources (credit repair/employment/childcare/education/etc) so that by the time the balloon is due, the tenant will be able to qualify for a mortgage. 

Step 3- at the balloon period - 3-5 years - tenant will assume the mortgage balance and transfer ownership of the home. 

-obviously this is super high level and I don't have all the details figured out....but I'd love your input. 

A few issues I see- raising capital- as you can probably tell, this is not going to be profitable. I find it hard to believe that there are investors willing to give money, knowing that there is not ROI. My partner and I know we will probably have to start small and have considered purchasing one or two properties ourselves this year to test this out- but our business is not at a place yet where we can afford to sustain the losses on a monthly basis (we are well aware that we will be cash flow negative given the rates and what we will be able to charge for rent). I am mindful of building something that we will be able to scale and make more impact- and I know making this beneficial to investors in some capacity will be key.

I would so appreciate insights from others who have experience with a rent-to-own model at scale or who have started a non-profit with incorporating real estate. 

Happy New Year and looking forward to connecting and doing what we can to make a POSITIVE impact !  

-Charlsi

[Bill B.]

I have zero experience but I have a suggestion and a question for you to ask someone. 

As a charity/non-profit will you be allowed to do something a normal landlord couldn’t and violate the fair housing act and discriminate by familiar status? (Allowing only single mothers to apply or “accidentally” only accepting them. Is my question. 

My suggestion would be to find cheap area to start. This would allow you to buy more homes with less money and make it easier for your tenants to qualify. Either cheap states (NM, AR, KY come to mind) or tertiary markets outside of the suburbs or bigger markets, small midwestern towns also fit this description. (Unless that would introduce too many transportation hassles for your target audience.)