3 Ways to Turn a House into a Cash Flowing Machine

3_Ways_to_Turn_a_House_into_a_Cash_Flowing_MachineSingle family homes are not known for enormous cash flowing production but in this training, you'll discover three ways to transform a house into a cash flowing machine. Using some creativity and intelligent marketing, you can turbo charge a single family house into a high performance money maker. You may have heard of one or even all of these techniques, but you may not realize just how powerful they can be to a real estate investor. The following video is longer than usual because this topic requires quite a bit of explanation. You'll be rewarded though for your time by learning what most investors will never know about making far more money on a rental home without having to change the property in any way. And I saved the best of the three ways for last, so make sure you stick around until the end!

Highest and Best Use of a Single Family Home


The highest and best use of a single family home is as a primary residence for someone to live in. Since houses were intended to be used as a primary residence, the two best ways to typically turn them into cash flowing opportunities are:

(1) To build from the ground up and then sell to a owner occupant (this is what builders do)

(2) Find a great deal on an existing house and wholesale or purchase, renovate, and resell.

It's typically a lot more difficult to profit significantly from a single family home if you rent it out, because that's not its highest and best use. By contrast, a multi-family duplex, triplex, quad or greater, were designed for renting out so renting is their highest and best use.


Problems with Turning Single Family Homes into Rental Investment Property


There are several problems with renting out single family homes:

  • 1. Single Unit Occupancy: When (not "if") a tenant of a single unit rental property doesn't pay their rent, the costs of that vacancy can be enormous. Rentals have lots of expenses like property taxes, insurance, maintenance, perhaps even a mortgage payment, so adding in the legal costs to evict a non-paying tenant can eat up all the positive cash flow that could be earned in a few years. The first major issue with turning a house into an investment property is that when the tenant stops paying, it can remove all the positive financial rewards for years. This training will teach you What Every Landlord Should Know About Property Management


  • 2. Low CAP Rate: As rental properties, single family homes often have low Capitalization(CAP) rates. This is a commercial real estate term that compares the price of the property to the amount of money it earns. To calculate the cap rate, you divide the Net Operating Income (NOI) by the price of the property.

Net Operating Income is calculated by subtracting all the expenses (except for the mortgage payment) from the gross rent. For example, on a $1,000 a month gross rental payment, there may be upwards of $350 in expenses, from taxes to insurance to maintenance to management fees. So the NOI would be $650 per month, or $7,800 per year. The average house that rents for $1,000 usually costs around $150,000, so the cap rate would be $7,800 divided by $150,000, which comes out to about 5.2%, or what is called a 5 CAP. That is very low considering that most individual investors shoot for at least a 10 CAP.


NOT Changing the Structure


Since the highest and best use of a single family home is not as an investment property, and there are two major issues with turning a single family home into a rental, you have to find a way to overcome these hurdles. Some investors overcome these problems by remodeling the property into a duplex, bed and breakfast, assisted living facility, or special needs home; but for this discussion, changing the floor plan is NOT an option. Single family homes have some enormous benefits that would be lost if the property was changed from a true-blue single family home.


  • Liquidity: Single family homes are the most liquid (easiest to sell) properties in real estate. By keeping the home in its most liquid form, you create much more safety in your investment portfolio because if disaster struck, you could get out much faster with the property remaining a single family home.


  • Appreciation: Houses tend to appreciate faster than other real estate asset classes because their values are tied to owner-occupant supply and demand as opposed to NOI. Net operating income typically doesn't increase as fast as the market demand of home buyers wanting to own their dream home.


It's very important to not change anything about the property itself. Keep it as a single-family home so that it is ready for someone to move in and purchase the property as their primary residence.


3 Ways to Turn a House into a Cash Flowing Machine


Instead of changing the property itself, you can solve this problem by being creative.  Here are three creative ways to overcome the major issues with turning a single family home into a rental property while not changing it from a single family home:


1. Student Housing:


If the property is in proximity to a college, you can rent to college students and not only remove the concern of vacancy issues, but also potentially increase the rent above market rate. This doesn't just work with big universities, either, it works for any small college too.

If you look closely, you'll be pleasantly surprised by how many colleges may be close to you. You can get the parents to co-sign so it is virtually guaranteed that you will collect the rent each month and if the tenants trash the place, you will have someone to sue to recoup the costs of the damages.

To increase the rents above market, you would advertise by the room (although you may have just one lease for all the occupants), and perhaps furnish the house and provide free WIFI. If a four bedroom house rents for $1,000 normally, you could advertise it as $500 per room and make $2,000 a month instead of only $1,000. There would be a cost for the furniture, but you could go to Goodwill to get it as opposed to Rooms to Go. And the WIFI wouldn't be free either, but the costs wouldn't be outrageous and it could become the "cool" off campus house that gets passed down year to year, securing positive cash flow for years to come.  A typical 5 CAP could turn into a 10 CAP as a student housing property.


2. Vacation Rental:


If the property is located in a vacation destination location it can be a huge cash flowing oppurtunity. To learn more on this topic, watch How to Buy and Manage a Vacation Rental Home. Vacation rentals are typically rented by the night or by the week. Over the course of a month, the total rental income can really add up. This very same 4 bedroom we have been using for our example, could easily bring in $4,000 per month gross rental income. However, there would be several more expenses to pay including: utilities (water, electric, gas, cable TV, internet) and if not already furnished, some nice furniture and household items.

Even with the extra costs, the huge increase in cash flowing income far offsets the extra costs and what would normally be a 5 CAP could become a 15 CAP as a vacation rental. Another huge bonus of a vacation rental is that evictions are not an issue. Your guests are on vacation and most will have to go home because they have jobs, lives and responsibilities. You won't have to force renters to leave; they will move out on their own.


3. Rent to Own:


Since many houses are not in a vacation destination or near a college, another great way to increase NOI and reduce vacancy is by offering the house as a Rent to Own. First, you're going to get an upfront non-refundable auction payment. This is a payment you receive when your renters first move in sign a lease with you. The first document is the lease agreement and the second document is an auction to purchase the property at the agreed upon price. In order to receive this option, the renter must pay you an upfront non-refundable auction payment that can be $5,000 or more. Yes you can settle for $2,000 if you want to but if you're good at marketing you can get a whole lot more than that.

Many people have what is called, "mattress money", so they have that $5,000. Tax refund season is also a huge time of year for rent to owns. The next thing you do is push all maintenance on the tenants, because they are becoming the owner. If something goes wrong, they're becoming the owner of the house, so it is all them.


  • Laws

Keep in mind that there are certain landlord and tenant laws that can supersede this. An example is when the air conditioning system goes out,  the landlord and tenant act can say that even though they signed an agreement that said they'd fix it, the landlord still has to fix it. That can happen, but for the most part you can push all of the maintenance off on the tenants. This will save you at least $100 a month in management, and another $100 a month in repairs. You're saving money with a rent-to-own because when there's no maintenance issues, the tenant handles it, so you are no longer receiving property management calls.


  • Lower Rent


On top of the upfront money and no maintenance, you can also earn a higher rental amount. I will explain this further because it's not a higher rental amount normally, unless you structure your rent to own intelligently. When you do a rent to own, people are typically going to expect to pay at or below rental rate.  But what you can do is offer what's called rent credits. Not every state allows this, an example would be Texas and a few others, but you can offer rent credits almost everywhere.


  • Rent Credits


Rent credits allow you to raise the rental rate, so if the normal rate is $1,000 a month you can bump it up to $1,200 a month and then give them a rent credit of say $300 a month. You might be thinking that this is not a great deal because you are giving them a larger credit, then the amount you are raising the rent. The big secret is that over 90% of the people that will do a rent to own will never exercise their option to purchase. Almost all rent-to-own tenants never purchase the property, because it is simply the way people are.

People typically don't have a better financial situation tomorrow than they did today. Those that aren't watching videos like this are not trying to improve their financial life, so the optimism they have when they move in is crushed by every day life. They assume that within a few years they will get a raise or a better job which will improve their credit and allow them to qualify for a loan to buy the rent to own, but that does not always happen.

A year goes by and none of these things have happened, in fact, often financial emergencies happen, and issues occur, that leave them in a worse financial position then when they signed the rent-to-own lease. Even if you try to help them by finding credit repair services and mortgage brokers, they will still be unable to qualify to buy the house. This is a fact of life and the rent-to-own investment business.
With a rent to own, you can take the gamble of raising the rental rate in exchange for a big rent credit, because you know that 90% of rent-to-own tenants will not exercise the option to buy. If they never exercise the option to buy the extra $200 you make a month is positive cash flow. You have no maintenance, plus you raised the cash flow. All of a sudden the cap rate is approaching a 10.
This is a great way to turn a single family home into a cash flowing machine anywhere. Every single family home will not be suitable as a vacation rental, or student housing, but a rent to own is always an option.

The worst case scenario with a rent to own would be that the tenants buy, but if you price it right, you will still end up cash flowing a lot.   It's a win-win no matter what. If only one out of ten of your rent to own properties ends up selling, you can take the money you earn and buy another property. I love the fact that I get money upfront that can help if their is a problem with the tenant, and I end up having to evict. It gives you the money you need to pay the attorneys, repair any damages, and get the person out of the home. The rent to own is also super exciting
because so few people do it.


  • Advertise


Put up a handwritten sign that says, "Rent to own," in big letters on the top. Put, "No banks needed," at the bottom, and then you can put your phone number and house information in the middle. If you put signs like this up around town, you will receive hundreds of phonecalls. You will actually have to set up a different phone, because it will ring off the hook. This works in rural areas and urban areas because there's a huge population of people that want to rent to own their own home and almost no one offers it.

When you put up these signs expect a lot of phonecalls and the majority of the people calling won't even have the job or money to be able to do a rent-to-own. You will have to filter through potentially hundreds of phone calls. I actually let these calls go to voicemail, where the message clearly states that you have to have at least $5,000 to put down, and $1,000 a month to qualify.


  • Find the Right Match

You're going to have to filter through these people because you're going to get hundreds of phone calls. But the exciting thing is you won't have an issue with potential people, because there's no concern over the dearth of people that want to do a rent to own. This technique alone could greatly improve your cash flowing situation moving forward for every single family home investment. I think every creative real estate investor should offer rent to owns, because they will build you all kinds of wealth,  because when people move out you can easily move somebody else in.


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  1. Karen Dewtree says

    If you want to do a vacation rental and use a management company, perhaps because it’s out of state from where you live, be careful. if the management company owns their own properties they will always rent their properties before they rent yours. we had this problem with our rental in Kissimmee Florida. we ended up with a straight rental which did produce pretty good income. Then we sold the house after 3 years at a pretty good profit. I have a friend who owns a property also in Kissimmee. She manages and rents it from her home in Minnesota This is not hard to do once you have local resources like handymen, home cleaners, pest prevention Etc. she reserves a week every 6 months for her own family. They go to vacation there, fix any problems that have come up and spend the rest of the time at Disney. it has worked very well for them,

  2. Chris Pederson says

    Thanks for the tip to market a single-family home to college students. I want to start investing in real estate rentals. I’ll look for a single-family home next to a college campus near me so I can buy and rent it out for extra cash.

  3. Beverly Diane Branch says

    Hello I am interested…

  4. Carol Davis Deveaux says

    I have a row home in on a quiet neighborhood and I like to turn it into anything to make money instead of just paying taxes on it every year. Do I remodel it completely or just were needed. LaSalle is nearby . Philadelphia is a great place to visit on vacation. What can I do with it?

    • Phil Pustejovsky says

      Why not remodel it and resell it to a retail buyer; then, you’ll be sitting on plenty of cash to decide where best to deploy it for maximum returns?

      • Beulah Garrick says

        Thank you Phil for great information .I really want to get ahead but there are things in my way I don’t know how to navigate them! I really could use a Mentor !

  5. Alicia Byrne says

    I think you’re very right in saying that turning single-family homes into student housing can bring in high income for rental. My husband is thinking of buying a house as an investment but he hasn’t decided where and what. I think that I should tell him about student housing and perhaps we can start out searching for housings near colleges or universities?

  6. Joe Kwong says

    I am interested in learning more about your mentorship program. I am interested in a rent to own Florida property where I can cash flow via airbnb

    • Freedom Mentor says

      It sounds like you are looking for a mentor to help you learn how to invest. If so, make application to become one of my apprentices…

  7. Do you have a sample rent to own contract or the option contract please?

  8. Quinton Swift says

    I would like to get more information on your apprenticeship program. Thank you.


    Quinton Swift..

  9. Hi Phil,
    Thanks for the clarity of your presentation, especially Rent to Own. How can I learn a bit more from you?

  10. Thanks for sharing your time and real estate knowlege

  11. George Nakhla says

    I would like to purchase your 2 books. Thanks

  12. Phil – I have been doing Rent to Own for 7 years on 100’s of homes and it does work. We offer a 3 year lease to give folks more time to sort out there credit and prepare for ownership. And a $150 credit per month towards the purchase. We refer them to a local non-profit to secure downpayment assistance to try to increase our conversion rates, but it is challenging.
    And the Airbnb concept is great as well. Been doing this for a year and it has skyrocketed gross income, and bottom line. The issue with it is the financing, as the revenue stream is not recognized by portfolio lenders.
    Keep the concepts coming. Great Stuff

    RTO Property (the RTO stands for….you guested it….Rent to Own)

  13. Levi Preston says

    Please mail me a copy of your book about real estate investing.

  14. If the renter does buy the home, how does the rent credit get applied? I assume the deposit is used towards the purchase price. Is that the same for the rent credit?


  15. Rebecca Thomas says

    I’m currently renting out my 2 bedroom condo (located two blocks from the beach in NYC.) I’m approaching the halfway mark on my 30-year mortgage. Do these principals only apply to a single-family house? Would it be best to sell the condo and get a single-family home in a prime location for college students or vacation rentals?

  16. Thank you, Phil, for you informative and motivating videos. I have heard of these techniques, but didn’t understand. I thank you again for explaining, sharing and helping.

  17. Angie Jenkins says

    There is a nice 4-bedroom house right around the corner from me that would make ideal student housing. It’s been for sale for months (foreclosure) and is now bank-owned. Is it possible to offer a small down payment? Just wondering if this is a doable deal.

    • Freedom Mentor says

      You won’t know until you ask what the bank is willing to do. But my advice would be to act on these opportunities before they become bank owned.

  18. kingsley hapambali says

    Hi Phil,
    Your trainings are excellent!

  19. Great Information in the videos BTW!
    Thanks Phil!

  20. JOSE ROMERO says

    Hey Phil I just started to listen to your videos. They are great and easy to understand.

  21. Mnuela Saenz says

    Thank you Phil. You are very cleaver and you grow my brain with great tips; nothing but our blessings in return.

  22. Phil,

    Great stuff.

  23. Great Video and awesome information.

    Question: What paperwork is involved in the RTO process? If a contract is signed that they will be RTO the property do they forfeit the contract if a payment is missed or they fall behind?

  24. LIsa Amos says

    OMG, this is awesome. I definitely considered the student housing but never thought of the rent to own. I own a 2-on a lot and was previously renting each house for $1400 a month. I’m in California so this was actually below market value. With the taxes and continuous maintenance that went along with section 8 tenants, my CAP rate was super low. I may look to you for more info on the rent to own option. I just put about 40K into rehabbing the property after the tenant destroyed it.

  25. Dan Laurita says

    I have a single family home in Panama City, Florida that I bought in 2004. We lived in it for a couple years then started renting it. We have had several renters basically destroy the house sometimes to the tune of a few thousand repair dollars. All were vetted with clean records. Didn’t seem to matter. Now we have been paying the mortgage, insurance, and taxes for a lot of years and the existing balance is still fairly high. The current renters have been in the house for three (3) years and pay very well and on time but….I’m not making any money at all! ( And my realty management company allowed them to destroy the property) Probably losing in fact but I don’t think I can sell even though a close-by shipyard just got a 5 billion dollar government contract. Actually…I don’t know what to do with this curse of a house. The renters say they have bad credit and can’t get a home loan. I could probably raise the rent a little and they would stay but if I raise it to what I think the market would bear I would lose them. I already went a year with the house empty and had to pay. Stunk!! I really don’t know if the renters would be open to a rent to own deal. HELP!

  26. Amilcar Rosa says

    Good evening from Jersey,
    I’m interested in information regarding your apprenticeship program Phil.

  27. Are you familiar with RTO own laws in Toronto or in other parts of Canada? Would love to learn how I can use this in Canada

  28. As always Mr.Phil you give all the right information & tips, it’s very good to be getting all this knowledge from you, you’re the best thanks David

  29. GrygorII Rozdorozhniuk says

    Really like your videos, there is no
    “bla-bla-bla” , but lots of information I need.
    Do you have any audiobooks ?
    I work as a truck driver in Saskatchewan,
    Have not much time to read, but tons of time to educate myself by listening audiobooks.
    Would like to see you video about differences between real Estate business in Canada and the US
    Thank you

  30. How are you financing RTO properties? If you aren’t able to purchase them 100% cash, what is the next option?

    • Phil Pustejovsky says

      I only do it on Subject To and Owner Financed deals; but many traditional investors get mortgages and rent/sell their properties on a Rent to Own

  31. how do you get a cap rate of 5.2 on your 3 ways to turn a house into a cashi yielding machine video? You indicated dividing 150000 by 7800 yields a cap rate of 5.2. 150000/7800 = 19.23.

    • Phil Pustejovsky says

      Flip the two numbers around from what is shown in the video to get the 5 cap number. I confused people by putting the 150000 above the 7800

  32. Phil great stuff here especially enjoyed Rent-To-Own. You are right about Texas not allowing Rent Credits what we do here is to offer a flat amount of money toward Closing Costs(at term of lease) if the TB ever gets his credit act together and gets new loan approved to buy the house.

  33. When covering vacation homes you said you can pull as much as 4k a month. How are you typically booking the property? By weekend or by weekly? How can you be sure to keep the property filled all month?

  34. Good stuff!

  35. Can a condo qualify as a vacation property if it’s in an ideal location?

  36. Hi Phil, I just finished reading your book HOW TO BE A REAL ESTATE Investor. It was fantastic. I want to start investing and try some of your methods. You mention different times in your book that a student came across a seller that was about to be foreclosed on or a student found a property that they offered to take over the payments or offeronly for the property. How can I find these sellers that are about to go into forclosures but not yet have?

    • Phil Pustejovsky says

      You can contact those who are in foreclosure but haven’t been foreclosed on yet. You can find them for free on Zillow.

  37. Thank you for the free copy of the book, i hope to make a use of it soon as i get it.


  38. Wonderful !!! Thank you Phil
    It’s really educational. Do you have any specific video on “rent to own” proces?

  39. Andres Medrano says

    This is a very good imfo. Thank you so much.

  40. Christopher Berggren says

    Great video! Phil, do you do any of your own mentoring, or is it all through your team?

    • Phil Pustejovsky says

      I personally mentor my apprentices for several hours every business day. My team helps but they are full time investors and part time coaches. I am a full time mentor and part time investor at this point.

  41. Steve Quinonez says

    Great info on rent to own! Here in Toledo there are hundreds of $30k properties that will rent for $750 a month. Not class A or B neighborhoods. They are C neighborhoods so the cap rate is much better. I would never buy a house in a class D neighborhood. Are these low priced homes worth looking into?

  42. Chuck McGlothlin says

    Phil, the incentive from the buyers side is the option to purchase or is it rent is going toward the purchase? Also the initial $5K goes to the option or the purchase price? Thanks

  43. Joyce Jones says


    Love the rent to own. Thanks for explaining it best.

  44. Hey Phil, love your videos. Very informational!

    If you don’t already have an apprentice in my area, I’d be interested in partnering up. I’ve got some equity in my primary home and would love to make sure I get my RE portfolio off to the right start.

    Thanks Again

  45. Anand, Madan says

    Mind blowing Rent to own. A must watch. Hats off.

  46. Another solid lesson Phil.

    Correct me if I’m wrong, but do you not have to own the home outright (no mortgage) to offer it rent to own?

    I’m currently in the final stages of a remodel that’s going over budget and this would be a nice other exit strategy.

    • Phil Pustejovsky says

      Do you need to own a property outright to lease it? Of course not, right? The same principle applies with a Rent to Own. You are leasing it. Sure, you are also giving the tenant buyer the option to purchase, but so long as the option price is more than your mortgage, you’re in the clear.

      • thx phil. one final clarification: it doesn’t matter if i currently have owner financing?

        • Phil Pustejovsky says

          If you are the owner of record by virtue of a Deed and then also have a Note executed and a security instrument filed, whether the lender a bank or the previous seller, then you can offer a Rent to Own to a tenant buyer.

  47. Scott Whitehouse says

    Over the years we have been selling our properties on contract to our long term RESPONSIBLE tenants. We paid nothing down for our properties and the tenants paid the mortgages off. Now we are “THE BANK” We like being the lender, not the loaner.

  48. Juan Carlos Garcia says

    Phil…I live in Sunrise, FL…where do you live?

  49. Phil, how long do you structure the rent to own properties ? do you give them a certain amount of years in which they would have to purchase the house ? I am currently working on purchasing a house to flip, but if costs run to high, i may hold and either rent it or with this option of rent to own, but have not looked into it yet.

  50. Great video Phil. I always like to watch for your ongoing support and ideas.
    Thanks to you and your team.

  51. LOVE IT

  52. Robert Nyenhuis says

    Good info! Thanks

  53. Where dose the credit go?dose it come of the perches price if they buy.

  54. Doug Sweitzer says

    The owner finance deals were all done with people that had all been renting the house for at least a year so I had a track record.

  55. Doug Sweitzer says

    I have done a few owner finance sales at 20% down, rental based payments, 10% interest for 12 years. They almost all ended up getting their own financing and paid me off. The sale prices were slightly above market so I came out great after 2 to 5 years of payments. Only one Skipped out and I had to for close selling the house at auction on the courthouse steps.I recovered all legal expenses and the bids went above market value plus I had the 20%down.

    • Phil Pustejovsky says

      That’s terrific! Thanks for sharing. The concern with offering houses on owner financing is that some states have a very complicated, expensive and lengthy foreclosure process and it can eat an investor alive. Evicting a non-paying tenant is much faster.

  56. bernadette says

    what happens after a year? if the people dont exercise the option do you have them leave so you can start over again? how long is their leaese option period?

    • Phil Pustejovsky says

      Depends. Sometimes I raise the rent and leave the same option agreement in place. If they are awful to deal with, I end it altogether. Sometimes J get an additional option payment. Sometimes I raise the option amount. Many different ways to handle it.

  57. Dennis Smith says

    I am wanting to start renting to own or Lease with Option to Purchase. I’ll need to see what the rules are here in Colorado for rent credit and get the contracts ready. Homes are very expensive compared to rental rate, so it may have a low cap rate, so I’m not sure how easily we will be able to do here, but may try in other cities. My question is: if you are offering rent credit ($300/mo) in your example, I’m guessing that the 90% that don’t want to exercise their option could want their rent credit back. They may be entitled to it since it would be considered “Equitable interest”. How do you handle the issue of Equitable Interest? Is there something in the contract that states that they don’t get that back? Did I not understand what you were suggesting? Thanks for your videos.

    • Phil Pustejovsky says

      We’ve hired some of the smartest attorneys in America on this and many other subjects of creative real estate investing and spent a small fortune in legal fees. Our attorneys, including one in Colorado, argue that Option Agreements don’t establish equitable interest, only bi lateral purchase contracts. Now, for some who may read this in other states, if rents credits were to bump the transaction into a problematic legal situation, the solution is insanely simple. You negotiate the original option price and then offer to drop it in exchange for a higher rental rate. Then, there is no actual rent credit on the option agreement but the tenant buyer still gets the benefit of the lower option price in exchange for a higher rental amount.

  58. Doug Sweitzer says

    I would like to see a copy of the rent to own contract. Do you have to supply an amortization schedule with the contract to show the credit the buyer recieves for additional payments?

    • Phil Pustejovsky says

      It’s not a loan with a note. It’s an option agreement. You can display the option price reduction by month if you want.

    • Doug, there should be no amort sched, as YOU ARE NOT financing them. This must not be misconstrued. Serious implications if it is..

  59. Kevin Burns says

    Rent to Own is by far the best method!

  60. I tried rent to own…the downside is that they tear up your home, they still don’t pay the rent on time, and you lose big time when the tenant/buyer moves out due to the tenant totally destroying your rental home. The tenant doesn’t take care of big cost items like roofs and A/C units. As soon as these go out or have problems, they still call you. Most of the time they just let the house go down the tubes. I agree that they don’t exercise their option, but the option money doesn’t come close to covering the damage these people do to your home. This really doesn’t work. Straight rent is better, where you control the tenant with a background check, and with a quality tenant you know you’ll get your rent on time and they will keep the home in order.

    • Phil Pustejovsky says

      You need to watch my video What Every Landlord Should Know About Property Management. When you offer a house on a Rent to Own, that doesn’t mean you skip the tenant screening process or other such important property management steps. What did work in your example was NOT the Rent to Own, but instead the way the property was managed.

    • I do the same as Phil. I have NEVER had a situation where I “lost”. That is not synonymous with never had having a tenant that wasn’t a problem or didn’t tear up my place. I’m just saying I still made money on them, and enjoyed greater freedom too.

      A few responses to your problems encountered:
      – Tenants not paying on time –> have very strict and aggressive late fee policies. I actually like it when my tenants pay late. I have made upwards of $150-250 extra per month!

      – Tenants calling you about repairs –> you must be very careful how you handle the tenant-LL dynamic. You can’t be too nice. Keep pointing out the agreement they signed. Remind them this is a rent to own, and deviation from the agreement can compromise their ability to own (i.e., if they want to be treated like tenants, they will lose their stake in becoming an owner)

      – Most of the time the house goes down the tubes –> I have NEVER had this happen. Both with those who actually end up purchasing or those who don’t. EVEN IN THOSE WHO ARE EVICTED. None trash it. I am not sure what you’re doing wrong here. Maybe your screening process is suboptimal.

      – Straight rent is better –> Absolutely not! Inless you like “tenants toilets and tough headaches.” You also lose independence.

      • We each have our own experience, but what I said in my original statement is true and I’m standing by it.

        In our area, screening tenants and asking for a sizeable down payment will simply not work. The competition is too fierce and the prospective tenants will just go to your competitor when you attempt screening them as you would do in a normal rental situation. There are just too many investors doing Rent-to-Own in our area. Forget about it!

        I’m just saying that you make this sound like you’ll be in rental nirvana–it’s not. This just doesn’t represent my experience with tenant/buyers. Collecting rent, having damage done to my rental property well beyond the upfront option money was common with my tenants. I would only suggest that this be done in states where eviction laws are more favorable to landlords and not tenants as well.

        • Phil Pustejovsky says

          Intense competition of other investors offering Rent to Owns is incredibly rare. Sorry to hear that you are in one of the very few places in America that has that problem. You’re what they call in statistics, an Outlier.

  61. vacation propitiates i was wondering were you list them because i have a home in the Philippines would love to rent it out

  62. i live in texas how would i handle this

    • Phil Pustejovsky says

      Handle what, a Rent to Own? In Texas you have to structure it for 6 months and then get creative on how it gets extended. We do them all the time in Texas.

    • Louie Salazar says

      Is 1 or 2 years too far out to do a ‘ rent to own’ , and do you give them todays price or do you bump it up a little for future price?

      • Phil Pustejovsky says

        I set the price at the highest the property could appraise for today. I usually do 1 to 2 year lengths.

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