One way to collect tent on a house that is higher than the market rent is to
offer a rent-to-buy program. The system can work extremely well. Before the tax
law changed, i was building about 60 houses a year. Of those homes, about half
of them served as a rental property. Although it's somewhat rare to build new
houses for rental property. I had a plan that work well. The new home were
available for sale, but also were offered as rent-to-buy properties so that the
partnership that i was involved in received some good tax advantage. I
authorized the people working for me as property managers to allow pets in the
homes, but with a higher rental rate to offset the possible damage to the
houses. A straight rental of a new home was sometimes allowed, but most of the
houses were filled with people who rent them with the intent of purchasing the
hoes. A portion of their inflated rent was to be applied to a purchaser's
closing costs when a sale was completed. This simple system increased the rent I
could collect by about 25%. At the time, houses in the area were renting for
about $500 a month. My hose rented for $625 a month.
My rent-to-buy program worked or several reasons. The most obvious was the
the much higher rental income I received. I also attracted better tenants who
took care of the homes because they intent to buy them. The lack of turnover in
tenants save me money too. When people bought the homes, I applied some of the
rent to their closing cost. This was not a loss because I made money on the
sale. Many people never saved enough money for down payments. so they continued
on the rent-to-buy program. This gave me tax advantage and increased income, a s
well as good tenants.
You will probably will not build new houses to rent out, but you still can
benefit from rent-to-buy program. If you purchase a property and rent it in a
manner similar to what i have described, you can turn a house that may have
produced a negative cash flow into winner. Most tenants will pay extra if you
allow them to keep pets. Many people are interested in rent-to-buy programs. You
can build rental rate increase into the option you sign with tenant to buy your
home. The sale price of home can be locked in or left floating, based on a current
appraisal at the time of sale. Apply any money you credit back to the tenant to
the closing cost, not the down payment, assuming you seek the rental income and
don't really want to sell the house in a hurry. This gives the tenant
fair deal financially, but can slow down the deal's pace as the tenant
saves for the needed down payment. As with most aspects of real estate, consult
with an attorney draft the arrangement for rent-to-buy deals.
