How to Sell Your House Rent to Own

how to sell your house on a rent-to-own

if you own a home and have any interest

in either selling or renting it at some

point in the future listen carefully

because what I'm about to share with you

could put tens of thousands more in

profits in your pocket and if you're

renting almost completely eliminate all

landlord headaches plus right now there

is a huge opportunity to apply this

technique in today's market hi I'm Phil

offski with freedom

I'm a full time real estate investor

real estate mentor and coach to many of

the most successful real estate

investors all across North America

best-selling author of two books my

first one how to be a real estate

investor has been out there for several

years and this is my brand new one real

estate investing gone bad both of these

books are must reads if you're going to

be investing in real estate in this

youtube channel thanks to you is by far

the most popular number one on YouTube

for real estate investing in the world

millions and millions and millions of

views so thank you for that now in a

previous video called three ways to turn

your house into a cash flowing machine I

described the concept of offering a

rent-to-own on a single-family home and

judging by the feedback many people had

never heard of this before now look I

didn't invent this this has been around

for a very long time sometimes it's

called a lease purchase or at least a

lease purchase option or a lease option

but the reality is offering the property

on a rent-to-own can be incredibly

advantageous and so many questions came

and so many people ask me to shoot a

video specifically about offering a

rent-to-own that here it is this is the

official video from me on how to sell

your house on a rent-to-own

why rent to own three main reasons

reason number one we've already begun to

talk about it and that is more money

when you offer a property on a rent to

own you first

what we call an upfront option payment

and that payment can be anywhere between

three to five to ten thousand dollars or

more upfront and that's non-refundable

money meaning they put the money up and

I'm going to go into greater detail in a

moment on exactly how this thing works

but they're going to give you upfront

money that's non-refundable that if they

don't buy the property you get to keep

it that's thousands and thousands of

dollars upfront if you've ever been a

landlord before and you've ever gotten a

deposit it doesn't mean you can use that

deposit right sometimes you're wishing

you could but you can't well with that

non-refundable upfront option payment

you can use that money because it's


next in some cases you can have

increased rent now not always but in

some cases your rental rate can go up

and that has to do with offering what's

called rent credits which we'll get into

in just a moment but perhaps the biggest

one of all is that you can have an

increased sales price so increase price

and here's the key no commissions so

when you sell on a rent-to-own

you don't have real estate agents

involved and look six percent is a lot

of money right especially for talking

about three hundred four hundred five

hundred thousand dollar house that's a

lot of money

well no commissions and usually you can

sell at the top end of what it will

appraise for so that's key if you can

sell it for the max it'll appraise for

sometimes that's more than it would sell

on the open market so those are three

ways you can make more money and that's

just the beginning number two is that

you have no landlord headaches so when

you when you're a landlord and many of

you watching have maybe either been a

landowner talk to somebody who has you

have this fear of maybe changing out or

fixing toilets at 2:00 a.m. well with

with the rent to own

since the person is going to become the

owner you make the tenant fix everything

why can why can you structure that kind

of arrangement because there are going

to be combed the owner

you can say look you are just working

yourself into what you're going to be

shortly and that is the owner of the

property so you have to get used to

these things like fixing toilets because

now you're the owner but for them since

they've got a locked-in option price

they feel like they're contributing to

their own home right so they're not

quite as frustrated by fixing the

hot-water heater or those sorts of


quick little caveat by the way landlord

and tenant Act may supersede this and

that's happened to me before where the

HVAC went out and it was all because

they never changed the filters for two

years but long story short I had to fix

the HVAC because the landlord and tenant

all right so it's pretty much no

headaches but obviously there can be a

couple of extenuating circumstances the

number three is just this huge

opportunity right now so the largest

potential home buying population are

millenials those are people that are out

of college right now and they're you

know their 20s or 30s

the Millennials that entire generation

that 20-year bloc of people is a huge

potential home buying audience and get

this 50% can't qualify for a loan 50% so

you think of all those Millennials that

are getting married they're having kids

now sure they may have rented in the

past but now they're life-changing and

now they want that single-family home

with that white picket fence and 50% of

them can't even get a loan well this

rent to own is for those people this is

this huge ocean of opportunity if you

put out and I'll be talking more about

these rent-to-own signs here in a minute

you put out rent to own sign you're

going to have the phone ringing off the

hook you have to set it to a voicemail

that's how many calls are going to get

so humongous opportunity and right now

is the perfect time because there are so

many people that fit into this category

that are perfect for the rent to own now

some have asked me on my apprentice team

they said Phil are you sure you want to

tell everybody about this this is a

huge opportunity but usually keep your

best tips to yourself when you don't

tell them on these from these free

videos well in this particular case I'm

not worried because it's such a huge

ocean of opportunity and no one's taking

advantage of it so you don't have hedge

funds out there on Wall Street that have

thousands of homes they're not doing it

you have almost no investors do it or

know how to do it right and then the

market is so big I'm not worried about

you all saturating it go ahead knock

yourself out we'll never be able to

consume this massive market it's so big

the amount of people who either is bad

credit or the fact they're self-employed

or a combination of the two the amount

of people that can't get a mortgage but

want to be homeowners will always be

enormous so I'm not worried about you

stealing all my good rent to own tenant

buyers because there's so many out there

it's such a massive ocean out there

we'll never put a dent in it rent to own

101 so the rent to own as I mentioned is

sometimes referred to as a lease

purchase it's also referred to as a

lease option and I know some people get

a little frustrated when I do that when

I lump these two together because they

try to say that they actually are

separate but the idea is this that the

person is renting the property but they

have this option this ability to

purchase so you structured a purchase

price at some point in the future now

what I'm going to suggest you do is this

don't do a lease purchase or lease

option agreement don't instead what I

want you to do is I want you to do two

separate documents I want you to do a

rental agreement okay and this rental

agreement is your normal rental

agreement except for um we want to have

the tenant paper for all repairs right

tenant pays all maintenance or all

repairs but outside that's the same

exact rental agreement as any other

business quick tip if you don't know

what to do as far as a rental agreement

I want you to hire the best eviction

attorney in the account where that

property is located or if you're

Louisiana parish or if you're up in

Alaska burrow you want to get the very

best of

diction attorney and ask them for their

rental agreement

so get your rental agreement from a

really good eviction attorney there's

your big tip okay and then and then tell

them if they're the one updating that

you want consider to pay all repairs

okay great now like any rental agreement

maybe even do a this might help little

tip make sure you put at least some

small deposit even if it's 100 bucks do

a deposit of a small amount don't do a

zero deposit and then it's a normal

rental agreement with the rental rate

and all that fun stuff okay

separate to that is this thing called an

option agreement option agreement these

option agreements have been around in

real estate for a very long time a lot

of commercial real estate is done

options they'll get an option on lands

let's say a developer wants to build a

target shopping center in the need forty

acres well they might get an option on

ten acres here an option on ten acres

there because they don't know if they

can get rid of twenty acres so option

agreement this is a separate document

and this is going to stipulate what the

price is and it's also going to

stipulate in some cases what those rent

credits might be what our rent credits

well what these are is when the person

makes a on time rental payment a portion

of that rental payment can go toward

this price okay and then the other thing

of course is your upfront amount now the

upfront is what pays for the option so

in other words you're not giving the

option to buy away for free just like a

landowner doesn't allow a developer to

get an option agreement on their

property for free the potential we call

them a tenant buyer this rent to own

person is going to pay you for this

agreement of an option

now what's this price going to be this

is going to be the max amount it will

appraise for it

actually has to appraise for the amount

you're offering because they're

typically going to be getting a loan

what I'm asking for you to sell the

property for more than value we're

telling you to sell it for the max

amount it can be valued at okay that can

be done through comps I have other

trains and videos on that so option

agreement is separate from rental

agreement and what ends up happening is

if the tenants don't pay

this is the document that you bring to

court to a victim okay and this is the

document that stipulates that this

amount is non-refundable so if they if

they get kicked out they also lose their

auction money as well you know some

people have asked me fill the ethics of

this because they look to me from an

ethical standpoint say Oh Phil you do

this real estate business right how do

you feel about the ethics of an option

agreement in a rental agreement whereby

if they don't pay then you take them out

well the first thing is this what

happens when you when you get a bank

loan you put down a down payment right

what happens when you don't pay the bank

they foreclose do they give you back

their down payment of course not right

so first and foremost this option

agreement is really a good deal for them

I usually lock it in for just real quick

I lock it in for two years usually if

you can do it longer or shorter well

that means that if the property goes up

two years from now did they get the

benefit of that because the price got

locked in when they first moved in so

they get it they get a pretty darn good

deal right and so I think it's fair on

both sides but look if they don't pay me

they're going to get kicked out and

they're going to lose their upfront

money now another thing about this is

that the vast majority of people do not

exercise their option to buy and so I've

been asked that question as well will

Phil aren't you just betting on people

to lose not at all I want them to buy

because if they buy then I'm selling it

for the max amount I can sell it for and

I don't have to pay the real estate

Commission's I want them to buy but if

they don't I'm okay too I don't lose

money there as well so no this is not

unethical this is great I'm giving them

a great opportunity now they don't take

advantage of a great opportunity that's

their own darn fault but I'm at least

giving them the opportunity and so the

nice thing about these rent credits is

that it helps them build some equity if

you will because it's paying down this

price then you can think about this if

the price is a hundred thousand here and

then they put down five thousand as

their down payment well now all they

really owe is ninety five but also if

they're making rent credits on time

let's say you give them two hundred

dollars a month that's twenty four

hundred dollars a year after two years

that's 48 hundred that's almost five

more thousand dollars

built-in equity such absolutely

fantastic form and in most cases what's

ended up happening is at the point in

which they exercise their option to buy

that's what they're going to get a loan

they're going to get some sort of a loan

to pay you off and pay everything off

because you're not going to be holding

on to this and giving them this right

credit clinics 30 years what you're

doing is you're giving them this period

of time in which to get their credit

right get their their job situation

right all those things right so they can

actually get the lonely one and they've

been building equity early some equity

all along the way so that's the

one-on-one of the rent to own you've got

a rental agreement and you've got an

option agreement and then option

agreements go stipulate how much what

you know and then how much per month

could go towards that real quick tip

rented credits don't always apply in

every state get a look at your laws in

cases where the rent credits don't work

out very well because they the judge may

argue or the the case law may argue

excuse me from a judge that anytime you

do this rent rental with auction

agreement that it could be considered

you operate it on an installment sale or

on owner financing if you offer these

rent credits but instead don't offer

rent credits as in on when they first

move in that every time the payments on

time and just say look if your payments

are on time you just go ahead and give

them this rent credit when they first

move in you always do it that way too

all right so that's right to own 101

here are some advanced tips to keep in

mind number one is this tenant buyers as

I call them our monthly payment

sensitive so just because you're getting

them this great opportunity they don't

always do the math that the monthly

payment you're offering is the same

amount that it would be if they were

gaining a mortgage they look at as

renters and so they're going to compare

the math to what it costs to rent so

make sure you don't try to over price

the monthly payment the only way you can

get away with that because I mentioned

you can sometimes increase the rental

rates is

if you offer red credits and you say

okay well if you do a thousand dollars a

month then you will get a hundred

dollars going toward your red credits

but if you go to 1,100 a month then I

will go to 300 and rent credits and you

might say well wait a minute Phil you

went up by a hundred dollars but here

you went up by 200 well I sure did but

why I did that was in most cases

statistically they're not going to be

able to actually close on the property

so I can raise the rent by a hundred and

still make out better by operating given

300 red credits because they may never

take advantage of this now again going

back to the ethical issue I'm getting

the opportunity of a lifetime

so just because they don't take

advantage of it's their own fault I'm

not betting on them to lose but I am

seeing that in most cases statistically

they're not going to follow through at

their option to purchase so I can

increase through our rental income by

100 bucks and then offering and the

reason why they take this additional

even though their payment monthly

payment sensitive is because I'm giving

them so much more of a red credit make

sense okay number two get good legal

help so the issue is not that this has

any problems from a legal standpoint I

mean you can rent a property and you can

sell a property with an option to buy I

mean that is so basic to real estate the

issue is whether or not when you have an

option to purchase and a rental

agreement at the same time does that

spill over into being an installment

sale and if so the reason why that would

be a problem number one is maybe if if

it runs into tens of the laws related to

making sure that you you handle your

owner financing correctly I've got a

whole video on that that's a relatively

new law but the bigger problem is if you

ever tried to kick them out because

they're not paying you then you're

trying to evict them and then the judge

might say well wait this is an

installment sale this needs to go

through foreclosure so get good legal

to make sure in most cases if you're

doing a rental agreement and an option

agreement you don't have this problem

but I'm not giving you legal advice so

keep that in mind all right number three

is this I talked about earlier how you

have to make sure you send all of your

traffic to a voicemail because if you

don't even get so many calls how do you

get those calls you can get them from

Craigslist ad if you run a Craigslist ad

for rent to own or signs let me show you

my sign this sign right here right there

can you see that that's the sign right

there you do that handwritten sign you

put that up all over the place anywhere

in and around and near that property

you're gonna get the phone ringing off

the hook handwritten is the key don't go

some professional looking one now this

one this is actually a handwritten font

I didn't hand write back um but it looks

handwritten and if you do this writing I

guess number four is send a voicemail so

that you have some sandy I'm telling

you're going to get so many phone calls

you're not going to believe it so send

it to voicemail

right to own pitfalls the first is

choosing unwisely so I'm going to say a

bad tenant buyer I have a great video on

what every landlord should know about

property management and the main rule in

the whole video I'll shortcut it for you

is choose your tenants or in this case

tenant buyers wisely you've got to

research their situation you got to look

at where they live now where they live

before talk to the previous landlords

heck even drive by they live that's a

great way to see the way they're going

to treat your properties where they

treat their existing property do

research on their employment do all

kinds of things to make sure you got the

right person in there because once you

move them in it's a lot harder to get

them out of there so number one is a

pitfall as a bad tenant buyer the second

pitfall is going to be no legal help for

example in Texas and the state of Texas

you can't do a lease purchase for one in

six months so make sure you know you're

yourself right get legal help to make

sure that you're applying this correctly

it's powerful but it also can be

dangerous and number three is a zone


low downpayment low DP if you accept

about $1,000 which is the same as it

would be if someone was putting a

deposit on a normal rental for your

non-refundable option payment well then

you're probably going to run into a

problem because this person will be able

to afford the monthly payments these

people are trying to become homeowners

so you have to be selective from a

financial perspective as well do they

have the money to have the wherewithal

to be a homeowner being a homeowner is

expensive so you've got to make sure you

choose wisely both from the perspective

of them being a tenant also how much

they've got available to put down and if

you don't market very well and you put

up one sign and get one phone call it's

your own fault you've got a market

handle you get a bunch of phone calls to

get the few people that have a whole lot

of money to put down the three to five

to seven to $10,000 down because

oftentimes that's a lot of money to them

and they're less likely to walk away

from that or cause problems so not

always not always the case but usually

the bigger the downpayment the safer

it's going to be for you just like a

bank banks like to have 20% down right

why because they've seen over time the

bigger the downpayment the better that

barn was going to be that's how to sell

your house rent to own and as you

discovered it can be incredibly

profitable it can reduce landlord

headaches and there's a huge opportunity

to apply it in today's market but you've

got to do it cautiously with the right

legal help to make sure you have all of

the details tied together I'm Philip

osteology thanks so much for watching

this to learn more

subscribe to this YouTube channel or you

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of the video I've got two best-selling

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make sure you grab them how to be a real

estate investor and real estate

investing gone bad thanks so much for

watching if you've got any questions

please put them down below here I try to

carve out time out of my schedule to

answer comments and questions thanks so

much for watching I'll see you on the

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