How to Generate Rent-to-Own Sales Leads
Helping people achieve home ownership is a rewarding side effect of the rent-to-own investment strategy. Home ownership is high on nearly everyone's wish list, so there is a big market for rent-to-own properties. Approximately one third of the adult population of the U.S. does not own their own home. The key to an investor's success with rent-to-own properties is to efficiently find tenant-buyers who have potential to see the lease option through to the end.
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Instructions
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Find a steady stream of rent-to-buy leads from your mortgage broker's "turn-downs." Approach mortgage brokers, especially those you have worked with, explain your investment model and ask them to refer their clients who presently fall short of qualifying for a loan. Explain to the broker that you are looking for people who are interested in home ownership, but need a year or two to qualify for a loan. Explain that the loan officer can continue to work with the client during the term of your lease; this way, they can assure that your tenant-buyer will later be ready to exercise their option to buy. It's a delayed close for the mortgage broker, but they don't lose their client.
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Place a classified ad. Gathering leads through classified ads can be hit or miss, but if you methodically explain your program over the phone and succeed in getting the client to fill out a basic mortgage application, which your mortgage broker can assess, you may find good tenant-buyers. Hold on to the contact information of those who fall short of qualifying and keep in touch with a quarterly newsletter. Direct them to seek financial counseling and have your mortgage broker touch base with them regularly to help them improve their chances of qualifying.
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Work with new home sales offices. These sales people are similar to mortgage brokers in that they are likely to come across clients that fall short of qualifying for a loan. Ask them to refer these clients to you and then assess each potential tenant's possibilities yourself. If the deal is right, you could purchase the builder's home and offer the client a rent-to-own lease option on the home. Finding the client first can sometimes be a successful strategy for rent-to-own investors.
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Create an opportunity to gather contact information on several rent-to-own tenants by holding a series of open houses at one of your existing properties. If you have purchased and remodeled a fixer upper, show it off with the plan of not only looking for a tenant-buyer for that house but clients for future projects too. Stage the property for the best presentation, set directional signs in the neighborhood and run classified ads on Craigslist or in your local paper to keep a steady stream of people dropping by.
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Assess existing tenants who rent from you. These renters may mature into good rent-to-own clients. When people live in a house for awhile, they grow comfortable with the property and the neighborhood and may find purchasing the home a desirable proposition. An advantage to this is that you can accelerate the purchase date if their credit is worthy. Negotiate a rent credit for past rent, if necessary, and settle on a fair selling price. Another variation of this strategy is to purchase rental property with tenants in place who are interested in a rent-to-own agreement.
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Tips & Warnings
Run credit reports on every applicant and accept only those who stand a chance of improving their credit to purchase the home by the end of your lease period. Work with those applicants who fall short and build a pipeline of future tenant-buyers.
Consult with an attorney, real estate broker or other professional if you have any questions. Be respectful of potential tenants' personal information. If you toss any applications, be sure to shred them first. Always be safe when holding an open house and have an associate help you host it.
References
Resources
- Photo Credit Images by: Keith Olsen
