Everyone Wants to “Rent to Own”


I own a mobile home park in Minnesota and occasionally I have older homes the park acquired that I list “for sale or rent.” The price is usually $8,000 - $10,000 to purchase and I always get the same message from potential customers “do you do rent to own?”

I know we shouldn’t do rent to own and instead should do a rent credit system.

But I don’t see the real benefit of a rent to own or rent credit system for older used homes the cash program won’t finance. I can rent the home for $400 on top of lot rent and make around $4,000 a year, (yes I pay for repairs) and have a $10,000 dollar home at the end of it. Or I can rent credit the home and the $400 goes to “pay off the home”. I still pay for repairs, and 2.5 years later instead of having $10,000 in rent and a $10,000 home, I have $10,000 in rent or “payments” and give the home away for free.

The other problem is what if the roof needs replacement. Well if I’m renting the home I pay for it with rent proceeds, if I’m rent crediting the home I pay for it, and if the rent credit is over and they own the home the roof leaks until the home is junk and they run off because they don’t have the couple thousand to replace it. Now I have tear down cost and an empty lot.

When people ask if I do rent to own I say no but I will take payments on top of rent until you pay it off. That doesn’t sound so good to them. They want to “rent” a home, at the market rate, and have there rent be treated like a mortgage payment with no interest, all principal.

I can’t get past the feeling I am giving homes away that have decent value. I must not be looking at this the right way.

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RTO doesn’t work because you’re neglecting the interest payments in your calculations. If you can make $2k on average, year in and year out, you are better off renting forever. Don’t let that asset go for less than $20k , or what else are you going to put that money into that kicks off $2k a year without fail? So to start with you’ve undervalued the home based on your example so of course you’d be shooting yourself to sell it for 30 payments of $400 ($12k).
What if the home rent depreciates and the home needs rehab and it’s a lot of aggro to get that $2k and it’s not as certain? Now getting it off the books sounds better.

And if the home is a money pit costing more than you make on rent, on average, in the end? Selling it sounds better and better.


I’ve found that one of the biggest advantages to having a resident have a path to ownership is turnover is much lower.

Turnover stinks. The home is sometimes scuffed up, there’s a vacancy factor between the home vacating and being filled again, and it takes a lot of management time to handle a turnover.

If I can get a resident to stay 8 years, and then end up earning the home, more power to them. They’ve saved me a bundle by sticking around, and I don’t mind sharing some of those savings with them.

For any type of rent credit situation I will typically charge a larger deposit than with a normal rental though.


For price of 10K , they should be able to come up with the cash. For higher priced homes, I will refer them to a list of 4 lenders that will lend on older mobiles in a park.
With a significant down payment, like 50% down, I will carry the balance at 8% fixed for up to 3 years. I believe it’s legal to do this up to 3times a year without being a “lender”. Sale is done through a title company and they write up the note and record it. Buyer must carry HO insurance for duration of the loan. Home is in buyers name, with a note in parks name. Buyer has to qualify with 3X the total payment (rent plus P and I) in verifiable income. The home is in buyers name, so Park is not responsible for upkeep or repairs.
I never rent nor rent to own. I get calls all the time from people wanting to rent, I don’t even consider it. I have learned to really screen my park residency applicants. It’s very hard to evict once they are in, here in CA, and now with COVID, evictions are on hold indefinitely. One bad actor in the park can ruin it for everyone, especially the park owner.

I go back and forth on the system myself. I currently have one that is paying payments but I don’t pay for repairs. I would probably feel different if the properties weren’t local. When I had a park 2 hours from me I sold all of those homes to only have lot rent.

$400 each month doesn’t need to “pay off the home”

You could give a lower percent of the rent as rent credit. That still gives them a path to ownership, but would not pay off the home as fast.

I am a big believer in home ownership. I’ve got 140 lots and over 110 of the tenants own their home and the other 30 are mostly on their way to ownership. This makes management incredibility easier and people take more pride in the home and the park. Long term lot rent is the easy bread and butter!

It is also best for the tenants to own the home. As someone who has owned parks for 17 years, and plan on keeping them at least another decade or two, my tenants financial well being is important to them and I both. Most people can get through hard times when they only have to pay lot rent and utilities.


Not sure who told you that you should not do “rent to own,” but I disagree. Keep in mind that “rent to own” has 3 words meaning you will rent and eventually they will own. You say you do “rent credit program” but that is rent to own. Lease option is also “rent to own.” You cannot make a decision based on 3 marketing words - you have to review the details of your contracts which may include a rent credit agreement, a lease option, or some other methodology.

I say that because we used to market our “rent credit” program, but some of our managers could not effectively explain it to prospects. We re branded and now call it “rent to own,” but the underlying documents are rent credit or lease option agreements.

You and Brandon have good points, and that is a valid business model to rent forever, but there are other advantages of transitioning ownership. Yes, you may be giving away the home for free after several years of normal rent payment with no premium, but the advantages can be great. First, by renting for 3 to 5 years, you have seasoned the tenant and know if you want them around forever. By gifting the home to them, as it appears is happening, you are lowering their rent to lot rent, but you are also removing your obligation to perform maintenance. By lowering their rent to lot rent, the desire to move is severely limited as it is impossible to find rent anywhere else for that price. By removing the maintenance burden, you free yourself of a huge workload.

The choice is yours, but both are viable. I personally find that managing rentals and the maintenance on them is the most difficult aspect of the business. This is primarily due to the ability to manage contractors from afar is challenging.

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Keep in mind — if you promise the customer they can own the home if they pay $X per month for Y months, but you can kick them out if they don’t pay — that’s a mortgage on a dwelling and probably quite illegal unless you are a licensed MLO.

Brandon is right. That’s why you can’t judge the book by its cover with terms like “rent to own,” “rent credit,” “lease option.” You need to look at the underlying details of each contract and be sure they are legal. Slight changes in verbiage in any of these documents can make them legal or illegal.