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Frequently Asked Questions

What are Rent to buy solutions and how do they work?

Are you or a loved one interested in getting all the benefits of being a homeowner and landlord without having to pay for repairs or maintenance with the potential of selling in 1-3 years at or above fair market value? This is your answer! Rent to buy solutions allow you to reap all the benefits of being a homeowner and a landlord without having to pay for repairs or maintenance on the property. The tenant buyer in a Rent to buy agreement typically rents the property from you for a set amount of time (usually three years), after which he or she has the right, but not the obligation, to purchase the house from you for an agreed upon price.

Here are some of the primary benefits:

  1. It doesn’t cost you a dime to fill the property. That is our job, and we are paid by the buyer.
  2. The percentage of evictions with this type of transaction is way below standard tenant eviction rates — so it’s a lot safer than a standard tenant.
  3. You reap all the tax benefits of home ownership (i.e. the interest and property tax portion of your mortgage payment are tax deductible).
  4. You no longer have to lose your mortgage or property tax payment every month since you will offset it with the monthly income.
  5. You don’t have to do any repairs or maintenance on the property – the new tenant buyer is responsible for all of it.
  6. You don’t pay for utilities
  7. They don’t call you like standard tenants.
  8. You get a 3-year lease rather than 1 year for most renters.
  9. You get a more stable tenant than a standard renter because the folks that move in see themselves as owners rather than renters. Remember the old adage, “You don’t wash a rental car.” Same goes for a standard tenant vs. a tenant buyer in a Rent to buy situation.

The entire process can be broken down into 3 simple steps: 

  1. You sign the following simple, one-page no obligation document that allows us to market your property to our qualified tenant buyers Rent to buy.
  2. You sit back, relax, and allow us to send you the most qualified tenant buyers for your approval. We won’t stop sending you qualified candidates until you are satisfied. 
  3. Once you approve a tenant buyer, we will have you both sign the appropriate paperwork. You get your first month’s rent upfront on top of all the benefits of being a homeowner and a landlord without having to pay for repairs or maintenance.

It’s really that simple. We put you at the center of what will prove to be one of the easiest, most hassle-free experiences you’ll ever have. It may end up being one of the best financial decisions you ever make.

For more information, please refer to the following page. If you have any questions, please feel free to send us a message at support@digiovannirealestate.com, call us at (425) 651-6517, or schedule an in-person conversation with us here. Once you are ready to proceed, please fill out this simple one-page, no obligation document that gives us the right to market your property to our tenant buyers Rent to buy.

In the case of Rent to buy solutions, what happens after I sign the LOA (Lease Option Agreement) Memo?

From here, the process breaks down to 2 easy steps:

  1. You sit back, relax, and allow us to send you the most qualified tenant buyers for your approval. We won’t stop sending you qualified candidates until you are satisfied. 
  2. Once you approve a tenant buyer, we will have you both sign the appropriate paperwork. You get your first month’s rent upfront on top of all the benefits of being a homeowner and a landlord without having to pay for repairs or maintenance.

If I no longer want to continue using DiGiovanni Real Estate’s service to market and provide me with tenant buyer applicants, can I terminate our LOA (Lease Option Agreement) Memo?

Yes, up until the point where you have accepted the qualified tenant buyer, you can cancel at anytime. However, once you receive your first month’s rent from the tenant buyer, the transaction will have been finalized.

What sort of option consideration/down payment do most people have?

We try to get between 3-5% of the purchase price. This typically comes out to between $5k and $50k as a lease option fee from the tenant buyer depending on many different factors related to the house and the amount of work that was involved. Also, the more we get as a down payment, the more stable the tenant is for you, so it benefits us both.

What is the percentage of people who walk away from the house when the lease is over (either because they are unable to get regular financing or decide they no longer want the home)?

Less than 30% of lease option tenant buyers will exercise the option to purchase the house from you when the lease expires. So it is likely that they will not buy it at the end. But there are some real benefits –

  1. It doesn’t cost you a dime to fill the property. That is our job, and we are paid by the buyer.
  2. The percentage of evictions with this type of transaction is way below standard tenant eviction rates — so it’s a lot safer than a standard tenant.
  3. You reap all the tax benefits of home ownership (i.e. the interest and property tax portion of your mortgage payment are tax deductible).
  4. You no longer have to lose your mortgage or property tax payment every month since you will offset it with the monthly income.
  5. You don’t have to do any repairs or maintenance on the property – the new tenant buyer is responsible for all of it.
  6. You don’t pay for utilities
  7. They don’t call you like standard tenants.
  8. You get a 3-year lease rather than 1 year for most renters.
  9. You get a more stable tenant than a standard renter because the folks that move in see themselves as owners rather than renters. Remember the old adage, “You don’t wash a rental car.” Same goes for a standard tenant vs. a tenant buyer in a Rent to buy situation.
If the person walks away from the lease what becomes of their down payment/option consideration?

It is non-refundable to the tenant buyer. When they end their lease, we would be happy to help you fill the property again – we have a very active and growing list of tenant buyers.

Who is responsible for upkeep and maintenance on the home?

This is one of the primary benefits of our Rent to buy solutions: all the repairs and maintenance on the property are the responsibility of the tenant buyer.

Since the home has a mortgage are there any problems with leasing that would cause the "Due on sale" clause of the mortgage to be invoked by the lender?

No, a lender would see this as a lease, not a transfer of ownership.

Because it's a lease, does the tenant buyer get the homestead exemption or would it be treated like a rental property, and if so, at what point would the taxes go up without that exemption?

It would be treated like a rental property so eventually the exemptions would be removed and the taxes would go up.

But – you also get the benefits of owning rental property. We know that some people think owning rental property is nuts, but we own a lot of rental property and know how easy it is to handle if you set it up properly.

You will get several financial benefits from keeping your property and selling it as a lease option:

  1. Depreciation on the property. This is a good thing. You can deduct 3.64% of the tax basis (27.5 years depreciation) of the improvement of the property against either active or passive income (depending on how you are set up). On a $100k property, this would equal about $1k in real cash savings on your taxes each year. (talk to your CPA for details about how this works).
  2. Appreciation of the property. Over time, the value of the property goes up. I know it’s been a rough patch in the market these last few years, but the likelihood is that the values will eventually go back up. This will make it possible for you to sell the property in the future and make a profit rather than have the potential (in many cases) of actually having to come to closing with cash to sell it.
  3. Buy down of the mortgage over time. Over time, the note will pay itself off. You may have years before this happens, but every month a little bit of your payment goes toward the principle and you will build equity.
  4. Rents go up over time as a hedge against inflation. The thing I love best about my investment property is that the rents go up. I know of no other investment that has an automatic hedge against inflation like this. Most houses have 30 year fixed payments, but as rents go up, if you apply the extra income to the mortgage each month, you will likely pay it off in 10-15 years because of the increased cash flow.

There are also some negatives to consider:

  1. Risk of vacancy. Over time, you will have vacancies. Each month the property is vacant, you lose money. The beauty of working with us is that we have buyers and can fill it very quickly. The risk of selling it on the open market is often much higher than selling it through us with a Lease Option. Keeping it on the open market, you must pay the mortgage, utilities, taxes, insurance, grass cutting, maintenance and wear and tear that comes from keeping a property vacant (did you know that the plumbing will often deteriorate in a vacant house because of lack of use?).
  2. Risk of damage from tenant buyers. There is always going to be wear and tear on a house when someone lives in it. When they move out, you will need to have it cleaned before you sell it again. It’s also possible that someone will deliberately ‘trash’ your house. This is very rare and is covered by insurance.
  3. Picking a bad buyer/tenant. This is another mistake many people make. That is why we put our tenant buyers through a qualification process that vastly improves the success rate.

The downside risk of taking on tenant buyers, in my opinion, is much smaller than the upside – especially if the alternative is a vacant house. We know that in a good market, 33% of all properties listed for sale on the MLS do NOT sell. We also know they will usually not sell for more than market value and that the cost to sell with a Realtor will run you about 10-20% after commissions, closing costs, holding costs, repairs, and negotiation. For many people who are close to market value on their mortgage, this cost just isn’t possible.

How do tenant buyers get financing when it's time to exercise their option to buy?

They go to any conventional lender and apply for a loan. The reason they are buying Rent to buy”right now is because they do not qualify for a conventional loan. Since 2007, conventional loans have become much harder to qualify for. That is why so many properties that are for sale by real estate brokers don’t sell. Buyers just can’t get loans without almost perfect credit. Appraisals have also been a problem recently, so even if the Buyer qualifies, if the appraisal doesn’t come in, they won’t be able to finance it.

Our goal is to help good, responsible people get into a home. People who will take care of it and treat it like their own. We’ve had good luck finding those people over the years.

If the tenant buyer exercises the option, that’s great and you make your money. If they don’t, the advantages of having someone pay down your mortgage are enormous.