There's a lot to know.Here's some things:

* Especially if it is your first time _ USE A LAWYER to draft the paperwork.

* Get a fair amount down-enough so they do not want to walk away. Small deposits only encourage them to think it's just a rental. At a minimum, 5 to 10 percent or more. preferably more.

*ALWAYS use separate lease and option agreements.

*Collect the initial money as an OPTION DEPOSIT ONLY,NEVER as part of the purchase price.

*NEVER allow any of the payments to be applied to the sale price. This can create " an equity position" which means if they quit paying, you have to foreclose on them instead of a simple eviction.

* Make the option time no more than 6 months unless you want trouble. You can put into the agreement that it can be extended only with your written permission and if extended there will be a new option price for the property , new payments and a new option deposit. What you want is for them to perform, not drag it out long term and then bail on it and call the whole thing rent in their minds.

*Make all maintenance and repairs their responsibility, BUT reserve the right to do regular inspections and if they are not keeping the place up, your crew will and they will be charged. Don't let them do nothing and get away with it.

*Don't let them pay the property taxes or insurance by themselves - they often don't. Make these part of the rent and make sure you collect it.

*Stay in control.

What you want, hopefully, is someone who is moving to the area, has a good job but needs to sell their previous property to buy yours and does this, usually within 6 months.

BE AWARE that many people will want these deals that don't or won't complete them, including scammers. Statistically, something like 90 percent of them do not close. If they are scammers or just poor performers, you can lose lots of money.

melinda,

State law is important.

I have done over 1,000 RTOs.

Never use any words that relate to owning, equity, downpayment, etc.

My option period is now 3 months.

The OPTION paperwork is totally separate from the lease and never refers to the lease. Totally separate transactions. Mine even states this does not relate to any other dealings between parties.

The OPTION FEE must not look like any of the rental amounts.

I used RTO as an advertising "hook" to get their attention.

I now use RENT DISCOUNT PROGRAM. They pay me a FEE to join my program and get a discount, just like Amazon Prime, Costco...and they do all maintenance except roof and HVAC.

People flock to the word DISCOUNT.

MUCH simpler and leaglly cleaner than RTO.

In TX you can lose more than the value of the house if you do it wrong.

At what point does the renter, while exercising their purchase option, need to be evicted if they fail to perform? At what point does the renter, while exercising their purchase option, need to be foreclosed upon if they fail to perform?

Ken is spot on - list it for sale if you want to sell it. Only about 1/3 of my options actually go through and I screen them tough.

But if you still want to swim upstream instead of down stream here is some guidance. Use a lease and have a second document with the option. Start your option on a different day than your lease.

Under Dodd Frank, they will not be able to buy it after becoming a "tenant" for at least six months. It doesn't matter if they hit the lottery and want to pay you cash. Options can be loaded with potential legal issues from marginal folks who are the least likely to buy. Those legal issues can cost you more than you make.

Options are not created equal. Some you use when you are a buyer and other when you sell. In this market place I like using options, to control the property as a buyer. Using a buyer tool when you want to sell isn't going to work well.

Some of the differences is gaining equable interest (as a buyer) and the length of the option. As a buyer, you want a long time line five to seven years, as a seller you want only about a year. As a buyer you want the property to cash flow, as a seller you want max cash.

Instead of offering that option, perhaps you can offer another incentive that don't. Make sure that incentive matches both your and your customers needs.

"What you want is for them to perform, not drag it out long term and then bail on it and call the whole thing rent in their minds."

As Richard mentioned (and Ray also), most RTO's never go to completion, and that is the business model. If you want to sell the house, just sell it. Find a quality, high octane REALTOR who SELLS THEIR OWN LISTINGS and give them an opportunity to walk through the place and tell you what needs to change. Don't guess. The 6% commission is worth their expertise if they are in the top 10% in your area. Don't cheap out and DIY: you'll list for the wrong price and sit vacant for months while the listing grows stale and buyers start to ignore it or sense blood in the water and start low-balling you.

A good REALTOR is worth their fee. Problem is, the other 90% aren't. So don't hire Cousin Bob who got his license last week and is trying not to starve. Rather, find the good one(s).

Interesting. The woman who owns a SFH next door to one of my rentals has been letting this family stay so long as they pay taxes and utilities... RENT FREE! (Unreal). The family has at least 4 members with visiting relatives, grandchildren and they have at least two large dogs and possible cats as well.