Rent to Own for Tenant Buyers

Have you ever worn a PFD? A PFD can save your life, especially in stormy waters. Otherwise known as a life jacket, a Personal Flotation Device is designed to stop you drowning. It keeps your head above water.

Selling property through a Lease Option can also be a life saver! Better than that – Rent to Own as a cash flow strategy can help get your feet back on firm ground! So how does Rent to Own work in practice? How can it benefit you?

Selling on a Lease Option

We all know property pays when its held; just as whiskey pleases the palate the longer its kept. So selling is not always the preferred route – after all a felled tree wont fruit. At times though, you need fuel to stave off the cold. You may need to sell. Or you may be so tired of treading water that you are about to give up. Here Lease Options can really shine! You may grant an Option to a trusted investor or to a tenant buyer. Lets look at these in turn.


Selling to another investor


With their local network and knowledge a distant investor may be better placed to manage and tenant a property far from your home. They may have available funds and the appetite to improve a house which has been neglected, abandoned or damaged. Perhaps they have cash reserves to survive a downturn, whereas you do not.


You want the confidence that the investor is experienced enough to make things work, and will make the monthly payments until the Option is exercised. 


Selling to a Tenant Buyer


Rent to Own is a simple arrangement whereby the tenant can live in the house and pay rent, but also has a legal document giving them the right to buy the house within an agreed time frame.


Consider some of the benefits of selling to a tenant-buyer


    • Home-Owner mindset


    • Regular rental payments


    • Extra monthly payments


    • A lump sum when they move in


    • No calls about maintenance issues


    • Freedom to focus on your business



How do you find Tenant Buyers?


Advertise, advertise, advertise!
Ads in your local newspaper are one of the best ways. Try something like: "Wanted, local family fed up of paying rent! Rent and Own your own home in xxxxx from just £150 per week. Call xxxxxxx"


Since you are searching for those who aspire to better, put your ads in the "for sale" section.


We have also had good success with leaflets, postcards and word of mouth. Keep the message simple, clear and consistent. When searching for tenant buyers dont use ugly marketing.


The calls


You might take them personally, have your pa or call centre do so, or use an answer machine service with a solid recorded message. Use what works for you. I prefer personal contact. Be professional and warm.


Showing the house


Arrange group viewings to create competition. Ensure everyone knows that there is a huge demand for this opportunity. You are not selling houses. You are offering opportunities.


Since people are attracted by light, cleanliness and the feeling of space, create these things. Prepare the house for viewings or get someone to do it for you. I recently was impressed by a presentation by Suzy of Why not explore what they can do to help.


When your prospective tenant-buyers arrive, greet them at the door. Get them to fill in a simple form with columns for their name, and the amount of money they have to get started in their new home.


Choose Your Tenant Buyer


When you find someone who loves the house, discuss figures, and not before.


You need to agree the Initial Option Fee; the monthly rent (this may increase, encouraging them to buy); and the extra monthly payment (if any). The purchase price can be frozen for any period that works for all. You will want to structure the agreement so that the tenant buyer will have a suitable deposit within the term.


Find out


    • Their income


    • Their credit history


    • Their track record with rents


    • How much they have to move in



Have them work through and autograph the application forms. At this stage you should be collecting some money to hold the property for them. Do your checks and dont delay in making your decision as to who gets the opportunity.


Get the paperwork right


Choose solicitors familiar with Rent to Own. For details see our web site


Your tenant buyer will want to take balanced advice before signing the Option paperwork. Ensure your rental agreement is separate from the Option.


Prospective buyers remain tenants until the Option is exercised. If serious problems arise you will evict under a section 8 or section 21 Notice. Because this may be problematic if the tenant claims an equitable interest, you may consider protecting part of the up-front cash paid as a Tenancy Deposit.


Lease Options are like PFDs - good in calm waters or stormy seas. They can keep you afloat and help get your feet firmly on golden sandy shores. Selling on a Lease Option not only relieves you of the headache that often comes with investment property, it can create the lift needed for a deep breath of fresh air! You can hold your head high and strike out for the land or get back on your boat. Lease Options and life jackets have much in common!

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