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In my state, TN, you do not have to give rent credit to the tenant.
Here you have 3 documents: 1 is a lease agreement 2 is the sales contract and 3 is the option contract. So, three separate transactions.
The lease is straight rent and the tenant does not get credit for any monies.
They do get to deduct the option price from the sales price if the elect to excercise the option. If they don't excercise and the option expires, you keep the rent, the option money and the house...and like the original poster said, you do it all over again.
ET

I don't know if you'll disagree with me, but this is what I see happening.

After this mortgage fiasco, lending requirements will be much more stringent, so all these people losing their homes will have no choice but to rent as they will no longer qualify for a mortgage loan. BUY RENTALS
With this new flood of renters, the vacant inventory will be filled and then as less properties are available, rents will start to rise.

With such high foreclosure rates, sub-prime lenders will do what ever to liquidate their inventory of houses and recover some cash (they need to pay their lender too). So buy these foreclosed homes cheap.

Put two and two together...buy the foreclosures and then rent them back to the fellows who were foreclosed on. Win-win situation.

Cheers,
ET[/list]

:beer: Thanks for the reply. I think I am going to flip my first house without forming any sort of business entity. I will get that umbrella policy though. Anyone else want to chime in?
To comment on the last part of the last post. Ideally, I would like to outright sell the property since I would recover all the cash and I can move on to my next deal, but the market is somewhat slow here. So, the lease purchase is a good option because: You get option $, you get rent $ and you get to sell the property at a pre-determined price (in the future). Now, if the option expires without the renter excercising it, well, you do it all again...Option $, renegotiated rent and renegotiated purchase price. The only caveat is that the $ will be tied until the renter excercises the option to buy. Well, this is a whole different topic, so I'll stop here.
Let me know what y'all think eh?
ET

Hello all,
Great forum here. I had a question for which I wanted all the experts' opinions...
For tax purposes (lowest tax possible), what is the best business structure (LLC, Corp, etc) for a rehabbing business? I am ready to set up my business and would like to get some opinions on which structure works best.
Also since it's a slow market where I live, I will also be offering my completed rehabs (that don't sell in a predetermined period) as lease purchase (rent-to-own), or outright hold as rental properties. I will be buying all cash, so holding costs are not such a pressing issue here.
I look forward to reading your replies.
Thanks in advance and prosperous investing to y'all.
ET