How Many L/O Tenants Actually Buy?

I'm wondering how many, what percentage, of rent-to-own tenants actually end up buying the property? Please let me know what your experience is and also approx. how many rent-to-own tenants you have experience with. This is a very interesting question for me. Has anyone done a broad survey on this question? Thanks for the feedback!!

Comments(7)

  • lansinginvestor2nd March, 2004

    I don't have any hard numbers, but from my perspective, it's a win-win for me either way - If they buy, great, we closed a good deal, if they don't, then I keep their option fee and I have added 2 years worth of equity in a house that I can then sell outright, or put another tenant buyer into. Win-Win.

  • Leg2nd March, 2004

    I agree that it's win-win, but the actual numbers are important also, especially for someone who wants to develop a portfolio of properties. And it's important for projecting your gross income. What's your number experience? Thanks!

  • scott_mn2nd March, 2004

    The question you are asking is a kind of subjective question because there are so many factors involved.

    For instance, do you give them more incentive to buy or not. Do you tend to sign up houses that people outgrow in 2 years? How is your local economy and is it fairly stable.

    My percentage is right at 50%. Although half of those I gave a little incentive to cash me out sooner, mainly because of location of properties or other related issues that I just wanted to subvert ahead of time.

  • Leg2nd March, 2004

    Thanksk for the numbers. It's very interesting the point you make; that you can offer a 'rent-to-own' and influence the transaction toward the end result that you want. If you're motivated to sell then make it easier, otherwise not. Any other comments about this?

  • scott_mn2nd March, 2004

    Sure for instance, I have a 3/2 lease/option, 8yr term, great rent (at seller's payment PITI), I'm converting it to a subject to (now I would have signed it up as subject to).

    Well the tenant I have in there put 8K down. Option for them is in a month. I sat down with them the other day and said, well gee, it looks like you guys have just outgrown this property, with the new baby and all, and you know going over your credit and income looks like you guys could afford something bigger.

    I don't think it was so much the incentive I gave them, I just sat down and found their need, they were figuring to just buy now and hold for a year since they would have the built in equity, then sell and move. But through talking with them I found out the wife was already out looking at other houses and I just spun the conversation towards the bright future of being in a brand new larger home where their daughter could run free. Yes I used that visualization. What sealed it for the husband is I said gee, I would hate for you guys to have to wait a year to be in that perfect home for you guys, well I’m not sure if I could do this but if I could refund maybe half of your down payment would that make you happy?

    Long story short is they knew the option payment was non refundable, they didn't care about the rent credits, just the possibility of not losing all the option money was more than they wanted.

    Meanwhile on this deal I got roughly 550 in net cash flow a month the last 11 months, plus 4K down. Next month they will be on a month-to-month to find a property, although I believe the wife already has one picked out, meanwhile I will get at least one day a week to show the property so I can refill it.

  • Leg2nd March, 2004

    The details here really help; the 'flesh out' the story. What was the option price for the house? What was the lease payment and how much was credit towards the down payment?

  • td2nd March, 2004

    Leg,
    That is a great question! I looked back to March '01 to now, and out of 23 homes, 9 have closed, 4 should close this year, 7 walked away for whatever reason. and 3 are at the beginning stages. Hope this helps.....

    Prosperous investing,
    td

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