As a conservative strategy that normally generates returns far exceeding the stock market, income property investing is about as good as it gets, in our humble opinion. The basic play is to finance the purchase of rental properties with enough cash flow that the monthly rent paid by a tenant covers the mortgage payment and, in the best case scenario, leaves a little extra in your pocket too. But don’t make the mistake of thinking that this method of real estate investing is the only game in town because offering a rent to own contract to a tenant can be pretty good as well.

A rent to own contract maintains the aspects of income property investing you like – cash flow, in particular – while adding even more profitability to the mix. Choosing a rent to own arrangement simply means you agree to take a down payment on the property while the tenant continues to live in the house and make monthly rental payments for a defined period of time, after which they agree to purchase the house from the seller. The benefit to the renter is that it allows them to stake a claim on a property without necessarily having financing in place to make the final purchase, and gives them a few years to find the financing.

The greatest benefit to the seller is that they receive an up front down payment of 5 – 10% of the agreed purchase price. This down payment is nonrefundable so, if the tenant doesn’t follow through with the purchase – and they often don’t – you are free to repeat the process with a different tenant or even the same one if they want to go around again. Write another rent to own contract, collect another down payment and keep cashing monthly rental checks while waiting to see if this potential buyer actually becomes a REAL buyer.

As the scenario unfolds, the seller begins to realize another benefit of the rent to own setup, namely that repair and maintenance duties of the property become the responsibility of the tenant. After all, it’s going to be their property some day and it is in their best interest to keep the place looking presentable.

Rent to own: don’t overlook the profit possibilities on your way to financial independence.

The AIPIS Team

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