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Investor Offers Deal |
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We have a home that is worth 400,000. We own nothing. We have been approached by an investor who is interested in a rent to own situation. )We will need to sell the home within 3 years to not have to pay capital gains) This investor will not live in the home but will sub out to another person who will then "rent to own". The investor will pay us montly payments and has agreed to buy the home in 2-3 years. (but can back out of that deal if she wants to). What is our advantage of doing this versus renting the house out on our own? We can not be assured that the investor will purchase the house. |
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Your last sentence sums up the drawbacks to what is proposed. Assuming you have a large capital gain, you could lose the chance to take your profit free of federal capital gains tax. And you'd still own the house -- you don't say whether you want to sell it but that seems to be the case. Or are you looking only to rent it? -- you don't really say what your goal is. So after three years not only could you still own it, but it could be cluttered up with a rent-to-own contract of some sort over which you might have some legal entanglements, and you'd get back a house that had been rented out, always iffy in terms of the condition it'd be in. Moreover, when you consider what the investor would pay you monthly, are you taking into account as one of your expenses the lost income you could get from the $400,000 you'd keep tied up in the place?
Altogether, a poor idea, unless you're in some sort of a bind and need an emergency bailout. Even then, it could land you in more hot water. |
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Edith
Originally published on August 31, 2007 |
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