Working with Tenant/Buyers

Once you control a property, you will want to re-sell the property to a Tenant/Buyer. A Tenant/Buyer will make payments to you to cover the costs of the property. It really is just basically a delayed conventional purchase. The Tenant/Buyer would sign a contract of Purchase and Sale to buy the property at an agreed price but the completion (transfer of ownership) does not occur until a later date – usually 1 to 2 years away. In the mean time they make monthly “rent” payments that cover the mortgage/taxes/insurance as if they are  the owner. Title would transfer  on the completion date just as in a normal sale after they have arranged any financing needed from the bank etc. The down payment made at the beginning is applied against the purchase price just as in a conventional purchase. Usually, they are also credited with a portion of the monthly rent as well for each month of rent paid.

The purchase price given to the Tenant/Buyer must be higher than the price you give the Landlord/Seller and the term of the contract must be less than the term you have with the Landlord/Seller. The monthly payment received from the Tenant/Buyer must also be more then what you pay for the property to Landlord/Seller. In the end it comes down to a feel for what the market will bear in terms of price and monthly payment. Of course your monthly cash flow income has to exceed the costs for all payments on the property. The price to the tenant/buyer is the base that sets all other amounts. It has to be enough to make a profit but not so large that it will not be attainable when the tenant buyer goes to finance/close at the end.