Lease-To-Own: A Better Way

Education & Training with Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals.

O.K... here's the post where I will share what I think should be the future of rent-to-own (also referred to as lease-to-own or lease/purchase).... an intelligent alternative to a problematic area of real estate. 

As stated in my most recent blog entry (below), there are several reasons people seek to do a rent-to-own, and it's not all related to bad credit or irresponsible financial choices.  But, whatever the reason,  I utilize a responsible alternative what is truly a win/win for buyer and seller.  

My program prequalifies applicants based on income, not credit scores.  We do review the credit report and credit scores, but it's not how we qualify people.   Once we verify the applicant's income, we can establish a "price range" for people to shop in.  Not everyone qualifies.  If they don't make enough income to purchase a decent house in our market, we can't help them.     You wouldn't believe the people who call off of rent-to-own ads thinking they're going to get a great house for cheap and all the rent goes toward the purchase.  It's not going to happen.  I have people who want to spend $450 per month to buy a house.  That will barely get a crummy apartment and certainly won't buy a decent house.  It might buy an old manufactured home on leased land but, as I explain below, we don't deal in manufactured homes for the rent-to-own program.   It doesn't work.

I advertise lease-to-own properties every day.  The easiest way to explain it is to give a sample conversation with a caller to illustrate how I do lease-to-owns:

Phone: Ring-a-ding-ding (or in my case music to "Take Me Out To The Ball Game")

Cool Carol:  Hello.  This is Carol

Wanda WannaBuy:  Do you have any rent-to-own homes in East Wenatchee (as compared to Wenatchee or other surrounding cities).

CC:  Yes, I have over 37 homes to choose from in East Wenatchee.  

WW:   REALLY?  How much do they cost?

CC:  I have  rent-to-own homes in all price ranges starting at $110,000 on up to over $300,000

WW:  Can you send me a list?

CC:  No.  First, we need to pre-qualify you for a price range.  I am assuming you want a rent-to-own home because you can't qualify for financing at this time.  Is that correct?

WW:  Yes.  I went through a divorce, and my ex-husband spent all of our money and ruined my credit

CC:   O.K.  We can deal with that.  Let me summarize how the program works, and if it sounds interesting, I will have you call the guy who pre-qualifies buyers for me.  Does that sound good?

WW:  Yes

CC:  We qualify you based on your income, not your credit score.  Once you are pre-qualified for a price range, you and I go out shopping for a home.  You can pick any home you want (that is listed for sale) in your designated price range.

WW:  REALLY?  (They get very excited about that)

CC:  Yes.  Once you pick the home YOU want, I have an investor buy the home for you, and they (the investor) put you in the home on a two-year (pre-arranged) lease/purchase agreement.  Two years should be enough time for you to get your credit straightened out, right?

WW:  Yes

CC:   I will tell you, though, my investors will not buy manufactured homes.  They don't buy manufactured homes because they do not appreciate in value as quickly, or at the same pace, as regular stick built homes.  We want you to be in a home that will appreciate for you in the future and you can build equity.   Does this sound like a program that might work for you?

WW:  Yes

CC:  O.K.  Would you like me to have the guy who pre-qualifies my buyers call you or would you like to call him?

WW:  I will call him

CC:  O.K... here is his number.   Blah-Blah-Blah  

So, that's my initial conversation with them.  The ball is then in their court to call my pre-qualifier.  They will either call the guy who pre-qualifies buyers or they won't.   If they don't it's probably because they know they don't have enough income to qualify.    

But, I also have people call who make $3500 - $8,000 per month.  I can help these people.  I won't go into all the details, but here are the highlights of the actual lease/purchase agreement.    The lease/purchase agreement is for two years.  One year is not long enough for most people. When they enter the program, they pay a $1500 retainer.  This does not go toward the purchase price.  It is for on-going support. The buy-out price is 110% of the investor's purchase price.  I negotiate the best price possible upfront for the investor and provide comparable sales to justify the purchase price.   

So, considering we are in a market appreciating at 16% per year, this is a great deal for the buyer.  It could even work at 5%.  Anyway, theoretically, a home purchased for $150,000 would be worth $198,000 in two years.  The buy-out price is $165,000.  The lease/purchase buyer should have $33,000 equity in the home when they go to get financing.    This could cover their down payment AND closing costs... AND it's treated as a re-fi because they've been living in the house for two years.     

The lease/purchase buyer's payments are based on a formula that pays all of the investor's acquisition costs.... mortgage, taxes, insurance, ROI for downpayment, etc.  It's just as though they are buying the house themselves... but using the investors money and credit.  Of course, the house isn't in the tenant/buyers name yet, but they get to accumulate appreciated value during the lease period, so it's easy to finance.     

The rest of the story and the key to the exceptional success of the program is the tenant/buyers must agree to enter our credit consulting service.   The credit counselors go over their credit report with them and outline a plan to get them on track so they can pay-off debt, raise their credit scores (or whatever the issue is) and be ready to finance within two years.  They can buy anytime within the two year period.  If they buy early, say after one year instead of two, they get a reduction on the buy-out price because the investor doesn't have his/her money tied up for so long.  

Does all of this make sense?  Can you see how this is a good alternative for rent-to-own buyers?  We have over an 80% success rate with this program and, in my opinion, it's because we don't let people get into more than they can afford and we make them accountable to do the things they need to do in order to get financing when the time comes.  

You may wonder how I am able to easily get investors for this program.  In a future blog entry, maybe I'll discuss how this is a good program for investors to participate in.  I truly do have lots of investors waiting to buy houses for my rent-to-own prospects.   The investors don't make money during the lease period, but at the end on the buy-out, so their incentive is to make it work for the tenant/buyer.  10% doesn't sound like much profit for two years... but it's all in the leverage.   

More next time...  

Posted by

"The best way to predict the future is to create it!"
- Peter Drucker

"Information is FREE. Knowledge, Experience & Integrity Are Priceless."

-Carol Williams

Retired: Real Estate Broker/Owner, Property Manager 
Coaching, goal setting and marketing consultant by appt.

Active: Golf & Travel Blogger
"Golf isn't a sport. It's a lifestyle."



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David Walsh

I am looking for rent to own in the Denver metro area. Pleae contact me with more information...Thank you!

Jan 26, 2010 01:46 PM #48

Looking for lease to own program like Judy's in Michigan. Would like any info for regular and manufactured homes.  Thanks

Feb 11, 2010 03:26 PM #49
Rick Breitenbach

After my home was foreclosed on in October of 2006, I worked with Apple Assets in Overland Park, kansas.  Working with Darin Volk was an absolute joy.  Apple Assets bought my property, created a lease with option to purchase and helped me establish equity in the home in a situation where i could not qualify for a mortgage.  I can't say enough good things about my experience with Apple Assets and Darin Volk and company.

Feb 16, 2010 06:19 AM #50

For many people, rent to own homes, lease options and lease-with-option to buy programs are the best solution and the simplest purchase and selling methods available. wants to make it easier for renters to begin enjoying the many benefits of home ownership for them and their families. List your real estate properties for sale, or rent for FREE at

Feb 16, 2010 03:15 PM #51
Bill Grau

I am looking for an investor to buy my house on a short sale from the bank. In 2006 the value of the house was $2,300,000. Its value now is $1,400,000. The house suffered some distres from acidental subterainien water intrusion, which I would fix for about $500,000. The bank wants to do a short sale since the value of the house,in distressed condition is about $900,000. This puts me under water & the bank does not want to agree to a principal reduction, on my motgage of $1,700,000. they will however forgive the unpaid differential & accept the $900,000 as full payment.

My interest is for an investor to buy the house and then give me a rent to own agreement. I am well able to pay any rent and or mortgage payments. my monthly income is $14,000. In 30 yrs. of paying mortgages I have never been late. Do to the fact that I battled with the bank, trying to get a modification, and on purpose not made my payments, my normal 730 plus rating has droped down to 630.

Please let me know if you have an interest to work with me.

Feb 17, 2010 04:54 AM #52
Ginger Moore
Wilkinson & Associates Realty - Gastonia, NC

thanks for sharing. I seem to have many people asking about lease to purchase. Great option for everyone involved:)

Mar 07, 2010 03:36 AM #53

Hello Carol,

Finding your blog was a windfall for me.  I have someone with investors who is interested in begining a business which seems to parallel your current business. I have been online attempting to find some one else who has done this and low and behold, I found you!  I am currently a loan officers for a Correspondent banker and was seriously thinking about trying to do business with this independent business man.  I would love to learn more about exactly how this works for you!!

Apr 04, 2010 03:10 PM #54

Im glad that you post a blog like this.. It is in complete details and people nowadays was asking help or an idea regarding with this. It helps a lot. thanks.

May 04, 2010 04:58 AM #55
Rent Houses to Own

Hi Carol, I think your filtering procedure is very well thought. How do you post your advertisement? Online classifieds or newspaper? I use mostly internet and bring up potential costumers to filter themselves automatically on my website. See my website for <a href=>Rent to Owns in Calgary</a>

Jun 01, 2010 10:56 AM #57

Hi Carol, I live in Tennessee and have spent countless hours online searching for a program like this and finally you offer lots of info, email address, company name and contact numbers AWESOME!!!!!! After Reading your blog I feel it can be done "SAFELY" verses getting caught up in a scam.  I have my up front fee can you help me. 

Jul 26, 2010 07:34 PM #58

I am divorcing soon and want to know if we do sell our home with a lease option does this allow us to buy another home before the year is on a one year lease option?

Aug 08, 2010 03:52 AM #59
Wendy Patton
Keller Williams - Clarkston, MI
Broker, Investor, Coach

Amen!!!  You will kick some serious butt in the near future with ideas like this!

Oct 24, 2010 02:31 PM #61
Garth Jones
Prudential Tropical - Valrico, FL

I have just recently started working with Community Empower, who seems to have a very well thought out program that has strong benefits for each party in the transaction.  Unlike traditional lease to purchase agreements, that heavily favor the seller, this one takes care of buyer, seller, and the realtors.  I am excited to see where it will go.

Dec 22, 2010 06:57 AM #62
Jim Gilbert
Keller Williams Fairfax Gateway - Manassas, VA
The Gold Homes Team

How well does this work when the homes are NOT appreciating or are depreciating 5% per year?

Dec 27, 2010 03:16 AM #63
Michelle B

Questions? Can one use the lease option for business? (Adult Family Home?) is so, does this type of agreement reduce homes available?

May 01, 2011 12:40 AM #64
Keith & Shannon French - Catonsville, MD
Baltimore's Best for Rent To Own Homes

Hi GOLD Team Manassas,

I'm just revisiting this asked back in Dec "How well does this work when the homes are NOT appreciating or are depreciating by 5% per year?

we do Lease Options as a full time business.  We fully educate our sellers that when it comes time for the tenant/buyer to purchase, the property could very well not would happen if the Lease Option price was locked in at the beginning of the contract and based on the market price at that time and the market slipped between that time and the time of purchase.

Basically, if the appraisal doesn't come in at the contract price, it'll be time for buyer & seller to renegotiate and work something out.  The seller has the choice of reducing the price to a point that the tenant/buyer can get a loan (this doesn't necessarily mean reducing it to the appraisal price...sales price could still be higher).  Another option would be to extend the contract until the property does appraise.  And of course we put terminology in the contract that says or any other arrangement that is agreed upon by both parties.

We've had the appraisal not come in at the purchase price 2 times.  Each instance it wasn't a huge swing and the seller just lowered the price as their primary goal was to be rid of the property and sell.  Besides, they weren't going to be able to get any higher a price from anyone else.  

I think it's very important to listen and know what the seller needs are as well as the tenant/buyer.  It's a long term relationship...lots can happen during the rental phase.  So you want to make sure it's a good match and a win-win for both parties.

May 01, 2011 10:52 AM #65
Keith & Shannon French - Catonsville, MD
Baltimore's Best for Rent To Own Homes

Michelle B,

One thing we love about lease options are their flexibility.  I can't see why these contracts couldn't be adapted to work for a business/Adult Family Home.  I would definitely recommend working with someone who is thoroughly experienced in using them and when you have an attorney review the docs, make sure they are familiar with the transaction.  Just like there's all kinds of doctors, you wouldn't consult a Pediatrician for a needed brain surgery.

I'm not sure what you mean by "Does this type of agreement reduce homes available".  Can you please clarify?  Thanks!

May 01, 2011 11:08 AM #66
Keith & Shannon French - Catonsville, MD
Baltimore's Best for Rent To Own Homes


How did the lease-purchase work out that you spoke about on this thread back in December?  I agree, the best transactions are when the deal is truly a win win for all parties and actually result in a sale.  We work with realtors all the time, too, making it a win-win-win!  Hope to hear from you!

May 01, 2011 11:10 AM #67
how to rent to own

This is great news.

I've updated to reflect how to rent to own.


This blog attacted a lot of attention in the papers over the last few days...

Jul 13, 2011 01:33 AM #68

Great article Carol and a good discussion.  I wonder how this can work in a climate where we don’t know if banks will be lending in a year or not.  I’m in Russia and the risks are so hard to predict.  How does the investor guard himself against falling prices? Thanks, Roman find.roman at

Dec 12, 2011 08:43 AM #69
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Carol Williams

Retired Agent / Broker / Property Manager
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