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RTO vs. Agreement For Sale? I would love to hear your thoughts.
Which is Better..
- Thread starter VanessaKirschner
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- May 22, 2008
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Selling
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Totally depends on terms and execution.
We do a lot of RTO's and they have worked very well for us. You can agree to a future value today (mark-up) and you can make money on rent. Tenant selection is critical. However, if it doesn't work out, it is relatively easy to evict (depending on your contracts).
An agreement for sale is already a done deal. Theoretically is less hassle because you are selling rather than renting. You can still charge a bit of a premium, and/or you can charge a higher interest rate than you are paying. The buyers should have a very large down payment to mitigate your risk because the only way you can get rid of them is to foreclose.
So both methods have pros and cons. The deciding factors for me are: 1) size of the client's initial payment and 2) my motivation to sell (if I want to wash my hands of a property, I would lean towards AFS).
We do a lot of RTO's and they have worked very well for us. You can agree to a future value today (mark-up) and you can make money on rent. Tenant selection is critical. However, if it doesn't work out, it is relatively easy to evict (depending on your contracts).
An agreement for sale is already a done deal. Theoretically is less hassle because you are selling rather than renting. You can still charge a bit of a premium, and/or you can charge a higher interest rate than you are paying. The buyers should have a very large down payment to mitigate your risk because the only way you can get rid of them is to foreclose.
So both methods have pros and cons. The deciding factors for me are: 1) size of the client's initial payment and 2) my motivation to sell (if I want to wash my hands of a property, I would lean towards AFS).