subject: Rent To Own Investing In Real Estate [print this page] Investing in Real Estate is one the fastest way to create wealth and opportunities. The less sophisticated approach starts with acquiring a property and renting to a tenant. Considering monthly expenses covered, initial capital investment is the only thing comes out from one's pocket. Or may be not...
Although it looks simple there are many factors involved in wealth creation using buy and hold. Economic fundamentals, location of the property, tenant selection process, maintenance etc. Too many variables will affect the final outcome.
Investors are always in search of great investment tools to eliminate all the risk involved. There is no way you can eliminate all the risks. However, you can minimize them with Rent to Own, and we'll see how...
If you already own a property you can apply the same principles. Firstly, monthly rent you are getting from your tenant must be more than your minimum expenses. These could be your mortgage, insurance, taxes, maintenance cost etc. That way property will cash flow every month. But considering purchase price and initial investment this isn't always the case. By giving rental credit towards purchase price you will be able to increase the rent more than the market value. For this reason, you will always cash flow and cover your minimum expenses.
As the tenant continues with the contract every year a predetermined price raise takes effect. In average home prices increased 4-6% yearly for last 3 decades. Deciding on a fair number of increases every year will be a solution for the seller to avoid short term economic changes. If the market goes up more than anticipated tenant will benefit from that difference. This setup creates a win-win situation for everybody.
As for the maintenance costs, since tenants invested in property with their time and money they will take care of property as their own. This will drastically reduced your management and maintenance cost compare to a regular rental.
Here we presented a self-governing method independent from short term economic and market turmoil with less investment for more profit.
