We are providing some landlord education today, and specifically discussing a few things related to rent to own properties. Many homeowners and prospective tenants are looking for rent to own situations, or lease options. There are different things out there people use to attempt to get the tenants to buy the property during the lease. Maybe they purchase it at the end of the lease or a portion of the rent proceeds go to the purchase price of the home. However the arrangement is designed, you have to keep some important things in mind.

Mortgage Contract versus Lease Contract

Sometimes homeowners find there are unintended consequences when doing something like this. A rent to own contract can look more like a mortgage than a lease. This is problematic because in order for the landlord to remove the tenant for nonpayment, that landlord would have to go through a foreclosure process instead of an eviction process. Foreclosure is longer and more expensive. It could cost you $20,000 in legal fees to foreclose as opposed to if you just leased the property to your tenant, and it would cost $500 to evict. If your goal is to get them to buy the house, they can rent it and you can still give them an option to buy at the end of the lease. Build this relationship with the right foundation.

Tenant Qualifications

A lot of time, rent to own situations are designed to attract underqualified people who cannot get traditional financing. Be aware of this. It could be a red flag that they have a low FICO score or they don’t have verifiable income. If they default, you could have a problem collecting. Keep this in mind, and don’t look at the small goal of getting someone in the home. Do what’s best in the long run. Hasty decisions can be expensive.

These examples are frustrating because they could have been handled differently and with less time and money expenditures. Make sure if you do a rent to own, you have a contract drafted by an attorney. Get good legal representation and don’t do it on your own. There are a lot of laws about how these agreements should work, and you need to protect yourself as a landlord.

If you have any questions about rent to own or property management in Colorado Springs, please contact us at Muldoon Associates.

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Daniel Muldoon
Property Manager-Owner

Daniel was the youngest licensed REALTOR in Colorado when he received his real estate license in 2003. He spends most of his time managing residential properties but also handles real estate investment sales. He is a member of local and national REALTOR associations, a member of the Landlord Protection Agency and the National Association of Residential Property Managers. When Daniel is not working (which doesn’t happen often!) he enjoys fishing, hunting, kayaking and spending time with this family.

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Jim Calderon
Maintenance Lead

Jim has been employed by Muldoon Associates, Inc for 7 years. He handles our showing coordination and is responsible for the detailed work of move in and move out inspections, periodic inspections, and other daily tasks. He is a native of Pueblo, CO and spends much of his free time at pool tournaments in Colorado and surrounding areas.

Ann Lepp
Office Manager

Ann has been an employee of Muldoon Associates, Inc for over 15 years! Her experience is greatly appreciated by owners and tenants alike. She handles all of the accounts receivables and accounts payables for our management department. Her two boys keep her busy after work and she enjoys trips to Cripple Creek.

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Prospective Tenant Concierge

I have worked in property management for a long time and I’ve worked with Muldoon Associates, Inc since 2005.  I enjoy working and I make sure I complete my job at my highest level.  I am family oriented and like to spend time with them.

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