How to sell rented house
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 mentor.com
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
non-refundable
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
things
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
call
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
can also go to my website freedom
Entercom to get other fabulous trainings
like this if you want to learn how you
can work directly with me go to my
website and check out my apprentice
program and like I said at the beginning
of the video I've got two best-selling
books if you don't already have them
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
next video
