The Key Rule for Rent-to-Own Buyer Approval

So how do you know really if a rent-to-own buyer is deserving of your property that you worked hard to get under agreement? Hey guys, it's Chris Prefontaine with another Q&A Thursday. I have my son Nick Prefontaine because he specializes in the buyer side and has for over a decade now, not just with our own properties, but all the communities that we're in. And I'm told we're in about 80 markets right now. Does that mean we're doing buyers in 80 markets? No, but we have deals going on in about 80 markets right now. Nick, this one's also one because we did a recent one. I think it might have been last week on why not to accept less than 3% down. So sort of along those financial lines, why is it super important and how did you come about it with respect to making sure the buyer buyers, we call them tenant buyers, have at least 3 times income for what the rent's going to be.

I, I'm so excited to talk about this. You know, I'm passionate about this as well as the item that we talked about last week for making sure that they have a sufficient minimum down payment. This is as important, if not even more important, to make sure that they're making at least 3 times the total monthly payment, because what this is going to do is set them up for success when it does come time for them to go and get their own loan. So this is going to put them— this is going to mean that their debt-to-income ratio, their monthly income to housing cost income, is going to be 33% or less. And that's where lenders, all lenders or most lenders are, are looking ideally for their buyers to see that they're able to qualify for a loan. So you're really doing the underwriting and doing the heavy lifting at the beginning so that when it comes to the end and it comes time for them to get their own loan, it's really you want to make it as close to a no-brainer as possible for the lender.

Yeah. And I know this is important. So let me ask this a different way. On the 3 times income, if someone has hypothetically— and I'm sure you've dealt with this— 3 times their income or— no, let's say this, they're just shy of 3 times. Do you sometimes try to work in a higher down if by chance they happen to be sitting on cash? Or what do you— what are your thoughts there?

Yeah. And this is kind of— it's not the norm, but it is something we do. So if someone's just shy of that 3 times mark, meaning within like, I don't know, $300 to $500, what we'll do is actually take a— if they have a strong, super strong down payment, we'll take a little portion of that down payment and apply it to buy down their their lease, their lease payment monthly. So then it puts them back into that 3x range just to lower the lease payment a little bit. But where you get into trouble, you can't do this if it's like way off. If they need to buy down that payment by like $1,000, $1,500, $2,000, even more, that's, that's where it gets really sticky and you're not able to make it work. But if it's just a few hundred dollars off, yeah, We're able to make that work.

Yeah, guys. Nick, for all of us, Nick and the coaches have done hundreds of deals together. So by taking part in the SMART community in some shape, form, or fashion, whether you're an apprentice or whether you're— and that's our group coaching— or you're an associate in our more one-on-one level coaching and deal revenue sharing, you're going to have either Nick or one of the coaches helping you. And what I mean by that specifically is like they literally will Call on— we call it a next step form. You might know it if you're not in the community as sort of like an application type form, but they're going to help you call on those. They're going to help you with your first buyer meetings. We give you the checklist for all that. Everything is set up for you. It's plug and play. All you got to do is go ahead and do the work with us looking over your shoulder. So be sure to subscribe to this channel here, Smart Real Estate Coach, because not only are these Q&As coming out every week, but we also have Motivational Mondays and Deal Structure Sundays. Because all 3 components are important for you to keep current, number one, and to keep your skill set growing and growing and growing because the market's ever-changing. Nick, any last-minute thoughts? And if not, we'll see you guys next week on the next Q&A. Not sure where to get started? Go to smartrealestatecoach.com/getgoing for free books, strategy calls, and a whole bunch more. We're going to help you get going the wicked smart way. We've been after this for over a decade doing exactly that.

As long as you're doing those those 2 things, the one we talked about last week and this week, there's really— your chances of failing in this business are very, very, very slim. Well, you just got to be patient.

Let's give them a teaser. What's the one we're going to have for them next week?

The one that we are going to have next week is what kind of property expenses will I expect the buyer to pay for? And then what about me as an investor?

I'll leave that hanging. See you guys next week on the next Q&A Thursday.