What Are the Risks in Rent to own Real Estate?

Rent to own property investments and lease purchase options have inherent risk factors that cannot be removed. These, as with risk factors involved in any type of investment scenario, are just the nature of the beast. However, in order for a real estate investor to be able to profit from such a venture, these risk factors must be acknowledged and addressed to minimize potential loss. What are the general risk factors in rent to own and lease purchase options?

Consider that the tenant buyers with whom you will be working are those with whom standard mortgage companies and banks are unwilling to work. This is usually due to insufficient credit, lack of steady work, high debt to income ratio, and other factors that are considered high-risk for a mortgage loan. This means that you are automatically signing up to accept a form of credit,through a contract, with someone that is not able to receive formal credit approval elsewhere. This is one of the risk factors that must be taken into consideration.

There is a chance that your tenant buyer will not continue payments as agreed in the lease purchase contract. You may find that, at the end of the contract, your tenant has decided not to purchase the property, at which point you again have a property on your hands to sell. Perhaps it turns out that, once the tenant buyer is in the home, he or she leaves it in a state of disrepair that is unacceptable and refuses to pay to repair it. That means you now have a property that is not only in your hands awaiting a new tenant but also must be repaired before being rented out again.

In order to minimize these risks, you need to have all aspects covered in the initial contract. Be sure you make it clear that the tenant buyer is responsible for regular maintenance of the property and that it is too be kept in acceptable condition. Cover the monthly payments in terms of amount, terms of the lease (how long payments must be maintained), and consequences of nonpayment. Make the tenant buyer gets renter's insurance and you have a rental policy on the property.

Have a lawyer attend to the documentation so that everything is legally binding, and make sure all parties have signed and dated copies of the agreement. Make sure you have a copy filed with the county as well so that the entire agreement is on record and there are no disputes as to what the original agreement was. This will also cover you in the event that the tenant buyer wants to reduce the offer on the amount for which the house was to be purchased.

Be prepared to take over your leased property if the tenant buyer decides not to make the purchase so that you are not surprised or negatively affected if they simply move out. It may be their choice, or they may still have insufficient credit to qualify for the mortgage loan they need. Make sure you have the means of advertisement to get the real estate property back out on the market quickly so you can find another tenant; there are always those who are looking for this kind of alternative buying method.

Most of all, keep track of the paperwork and make everything legally binding. You cannot remove the risk factors from rent to own housing options, but you can reduce the amount of risk by taking the necessary precautions.

Charles W. Moore is a U.S. Army Veteran who began Real Estate investing in 2001. He's now a Successful Investor, Webmaster, Speaker and Author.
Get a Free Report on Rent To Own Real Estate at: http://www.Rent2OwnExposed.com - Learn More about Real Estate Investing visit: http://www.REIeBooks.com

What is Financial Planning, Actually?

When you go to the bank, unit trust or insurance company, financial planning seems to be the new buzzword among customers, clients and people in the finance field. But, what is financial planning, actually? Is it strictly for the rich or people who have money to invest? Or is it for those who want to buy insurance and unit trusts?The truth is that whoever has financial challenges to solve or financial goals to achieve needs financial planning.

Regardless of how much money you are making, financial planning will help you achieve both greater wealth and financial security. Inadequate or poor financial planning can obviously lead to unimaginable financial disasters like nightmares come true. For instance, an uninsured loss can wipe out all your accumulated wealth.

Insufficient savings for retirement can force one into a reduced, low lifestyle or even worse, the postponement of retirement and many other financial catastrophes that are far too depressing to be named!

So in a nutshell, financial planning involves taking a broad view of one’s financial affairs covering many areas of wealth management and then going through a step-by-step process to solve financial problems and achieve financial goals.

Financial planning is also about making choices such as:

• Do I want to spend all my income today? Or should I save a portion of it?
• Should I clear all my debts right now? Or should I increase my savings for retirement instead?
• Should I plan for my child’s education? Or should I let him seek his own scholarship applications and apply for a student’s loan?

So, what is Included in Financial Planning? If you were to wonder what areas wealth management would cover, here are some examples:

• Cash flow management
  This involves assessing your current net financial net worth (what you own minus what you owe). This will generally tell you whether you are on your way to financial freedom… or financial disaster.
  
• Investment planning.
  Once you have determined the amount of money you would like to save, you should consider where to put your savings with the aim of receiving a higher return than your usual savings account. Forget the 2% p.a. interests for saving. You need something more sophisticated than that! An investment strategy has to be mapped out so that you will have greater success in meeting your desired financial goals.
  
• Insurance planning
  Insurance planning is required to in ensure that all your assets are protected and that your family members are well shielded by having sufficient insurance coverage.
  
• Tax planning
  The subject of tax planning affects everyone who receives income, yet it is an area that is largely ignored or forgotten by most people. Therefore, this area involves strategies making the most under the local tax regime in the area of your income, stocks, real estate, and property.
  
• Retirement planning
  You are not going to work your whole life, are you? When old age symptoms start to kick in or you have reached the mandatory retirement age, you will need to retire. Hence, having a retirement plan regardless of your age is essential!
  
• Estate planning
  Having an estate plan or a will shall ensure that your wishes for the future are carried out. In addition, an estate plan or a will can provide financial security for your family, ensure your property is preserved and avoid dispute among family members.
  
  All in all, an ideal financial plan does not focus on one aspect or product only, but it involves taking all areas of planning into consideration when making financial decisions.

We have started Personal Finance Blog

We have started this new blog to provide useful tips, stories and expert advice on almost any topic relating to etc.

Also we'll publish articles and news to help you gather enough information related to personal finance. And we'll give you links to other web sites where you can find more information.