Rent-to-Own vs. Chattel Mortgage


What am I missing? All this talk about rent to own POHs: Can someone tell me why one would use the RTO concept to sell POHs vs. just selling them to them the tenants on a chattel mortgage? Right about now when the tax refunds come in, one can get a $2000+ downpayment. Someone with that much into their home is more likely to take care of it. And being the "owner’ is always more powerful to someone than being a renter, even with rent credits. Many states require the landlord to maintain the property…just saying they’re a tenant-buyer doesn’t mean the TB have to pay for repairs and maintenance. But they do if they are actually buying it on a contract or chattel mortgage.

And don’t tell me Dodd-Frank/SAFE Act is easier: Rent-to-own arrangements are clearly covered by the SAFE Act. You still need to be making sure your Tenant-Buyer (or Buyer) is qualified. (I run them by a mortgage broker, who charges $30-50 to generate a letter stating the buyer is not spending more than 1/3 of their income on housing [payment, insurance, taxes]. I only send them there after I’ve qualified them as tenants of the park via, who I have found does the most detailed job of verifying employment and tenant history.)


Thanks for the link.

One big advantages of the selling outright over some RTO scheme that I have found is that you can get $2,000 down which seems to be working well in filtering out the nightmare tenants.

It also makes a big difference when it come to returning your capital when dealing with under $20,000 homes (your costs.) A typical example is:

All in expenses for new used home in park: $18,000
Sales Price: $22,000
Down Payment: $2,000
Interest: 0%
Monthly Payment, Lot & Loan: $700
Monthly Loan Payment: $350
Approximate time to recover the $18k from sales date: 2 years
Amount still owed after 2 years: $13,600, which means a little over 3 more years of $700/month payments till it drops to just lot rent.

I am counting nearly the whole $700 payment towards the recovery of the capital since that is your approximate increase in income over what you were receiving when the lot was vacant.


I think most every park owner would agree that they rather sell a home to someone who could qualify for 3rd party financing as opposed to any RTO, lease option or seller carried method. (However, I still can’t understand why there are so many rental parks in the Southeast).

With that said, the bigger question is that it all depends on your park and your market. We have one park in TX where the demand is huge and people will pay high rents. However, most have horrible credit and no/low down payment funds. Getting this tenant base approved for 3rd party financing is very challenging. The entire market is very ‘rental’ based. However, compared to our parks in WI, we are finding prospects with 700+ credit score and 10% down on brand new homes.

It all depends on your market.