Apartment and Rental Properties - RTO options How much to put toward purchase??

Ok, just wondering what the norm is to put toward the purchase of the home.

Right now I am renting to own at $800 mo w/ $100 going toward the purchase. She's been there a year and wants to stay another year and RTO. She asked if there was a possibility for a reduction in rent. I personally do not have a problem with that. However, I do not feel that $100 of the rent should be applied to the purchase if rent is reduced.

What I have come up with is the following.

$650 rent ($25 toward purchase)
$700 rent ($50 purchase)
$750 rent ($75 purchase)
$800 rent ($100 purchase)

I sorta figured I would give her some options. What do you all think of that? She has been a great renter, pays on time and she will be responsible for all repairs according to the old lease and new lease.

My current mortgage payment is $525 including tax and ins. However I expect a little increase from property tax but I do not expect it to go over $600 mo.

I sold her the home on the following terms at which will stay the same.
Purchase price $78K w/ up to $2500 in closing. She is responsible for all repairs and maintainance.

Right now she has $1200 that will go toward the purchase of the home IF AND WHEN she can get lending. I currently owe around $63,000 on the home. Of my mortgage payment about $30-50 goes toward principle. I would have to look this up but I am going off memory.

Fair market rent for my home is between $700-$800.

What is a fair amount to apply toward purchase?????

Thanks!
Liz

In re-reading your post I'd say you could make the rent applied almost any amount and it won't matter, she's NOT going to buy the house. How do I know? These people almost never do!

Why does she need a rent decrease? Easy, because she can't afford it at $800. Which means she's not going to be able to qualify for a loan.

You could do what I always did; I would raise the rent every year, and tell them that HALF of the increase would apply toward the purchase. That way they felt they were building equity faster.

You MUST HAVE a cap on the rent applied/limit on how long she has to close. Otherwise the rent applied eventually will exceed you principle pay-down and you'll start falling behind.

frank

Welp, Frank.......

Most ppl prolly wouldn't come back and say this but I am not like most ppl.

You were right. I left everything as it was and she was fine with that. She paid on time and has paid on time every month since this post. The problem, she lost her job and has given a 30 day notice.

My home is back up FSBO or RTO. I do not have a problem w/ just renting it out if that is what I have to do. I am not hurting for money or at risk of foreclosure and I can afford the mortgage payment if it sits empty.

I have had a lot of interest in the home since putting the signs out and listings up online. I expect at least 6 ppl to come to my open house tomorrow. Whether they want to buy, rent, or RTO I won't know for certain until then.

I have learned alot from you Frank and a lot from this whole ordeal in the last year and a half. If we don't sell the home before the capital gains time frame sets in we plan on just keeping it as a rental and putting a lot more money toward principle and getting it paid off.

Thanks again Frank for all your advice and thank you to everyone else who has helped me these last two years.

:wave: