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5 Costly Mistakes Investors Make When Considering Rent-to-Own Properties

Investors are always looking for new and innovative ways to make money. One option that is becoming increasingly popular is owning a Rent-to-Own property. This stream can be lucrative, but there are a number of mistakes that investors often make when considering it.

In this blog post, we will discuss the 5 most common mistakes and how to avoid them!

1. Not Doing The Investor Research

When it comes to Rent-to-Own properties, one of the most common mistakes is not doing your research. There are a number of different Rent-to-Own models and it is important to understand how each one works before you get started.

2. Failing to Screen The Tenant /Buyer

Another mistake is failing to screen the tenants. It is essential to find tenants who are responsible and have a good rental history, know their credit score and report, and be sure they have credit coaching. One of the most common ways to keep everything organized is to use a checklist with your requirements (references, history etc.) that you frequently update.

3. Setting the Rent Too Low 

Setting the rent too low can cause cash flow problems down the road especially if expenses increase.  Make sure that you are aware of all the expenses associated with Rent-to-Own properties, such as any repairs needed, mortgage, insurance and property taxes.

4. Not Setting a Good Exit Strategy

One of the biggest mistakes investors make with Rent-to-Own properties is not having a solid exit strategy. This can leave you stuck in a bad situation if the tenant cannot qualify for the mortgage.  Planning your way out on the way in is a great crisis mitigation strategy. It’s difficult to predict all the things that could potentially go wrong, but working with experienced professionals can help make the process smoother.

5. Not Having the Appropriate Legal Contracts

Rent to Own is a business and if the correct contracts are not used the investor and/or the tenant/buyer could be at risk.  It is important to have a solid Lease Agreement and Option to Purchase Agreement so everyone understands the process, what is expected of them, the payments, and purchase price.  There are several other documents needed as well, these are just two of them.

While there are many more mistakes that can be made when investing in real estate, these 5 seem to be the most common. By avoiding these errors, you will give yourself a much better chance of success in this field. If you have any questions or need help getting started, please don’t hesitate to contact me at donna@freedomlifestyleinc.com. I would be happy to assist you!

Client Testimonials

“Working with Donna as a partner and colleague has been extremely rewarding. She has a proven track record of creating financially sound real estate projects and always delivers an exceptional end product. Donna’s attention to detail, hands-on approach, and the ability to create real estate opportunities is exceptional. She is conscientious, acts with integrity, and genuinely cares about her team and partners. I would highly recommend working with Donna if you are interested in becoming more involved in real estate. We are fortunate to have Donna as a partner and to call her a friend.”

Jamie Miller & Derek Loepp – Real Estate Investors

“I have been working for Donna Cook as her contractor and maintenance man for several years now. I have nothing but admiration for the way she manages daily business matters, prompt payment of invoices, and her positive communication skill level.”

Paul Lewchuk – Contractor

“I would like to recognize and thank Donna for her valuable assistance. Donna Cook freely gave the time to assemble and organize property assessments, lawyers, and bids for properties that we have worked on! You may be interested to know that Donna’s overall ethics and honesty was very important during our learning and investment completed.”

Jackie Gayleard – Real Estate Investor

“Second chances are hard to come by and when they do we should take risks and grab the opportunity. Owning a home after some “challenges” almost sounds farfetched, but after meeting with Donna Cook at Rent 2 Own MB, it is absolutely possible. She explained how the program works and what was required, the rest was up to me. I knew it was an opportunity for my family and I to own a house, and after a couple of meetings and some thorough explanation from Donna, I knew it was the perfect chance to secure a place to call home. Any time I had a concern Donna was there to help and the transaction was easy. My family and I are very happy to have our own place, thanks to Freedom Lifestyle Inc. and Donna.”

MJ and Family – Rent-to-Own tenants that successfully qualified for a mortgage in and bought their home in 2018.

“I’ve had the pleasure of working with Donna Cook for several years now. She has introduced me to many of her Joint Venture Investors that have become great long term clients as well. I’m always very impressed by Donna’s professionalism and integrity. You can count on getting the straight goods in all of your dealings with her. She has great knowledge and skill when guiding and advising partners and clients through the purchase and finance process. Exceptional and profitable returns are always welcomed by her contacts. Donna builds and maintains solid working relationships through communication, determination, insight and hard work. She is very talented in her field as her proven track record demonstrates. I wouldn’t hesitate to recommend her.”

Dan Heon – Veteran Real Estate Investor
18 year Investor Mortgage Broker

"My family found ourselves in a difficult and stressful situation when the new landlord of a long term lease gave us a sudden notice of termination. With 2 young children, and family pets, we knew it would be very difficult to find an affordable rental that fit our needs, but we were not in a position to qualify for a mortgage to buy a house. I found Donna's advertisement on Facebook Marketplace, and her services were exactly what we were looking for. She was able to assess our needs and financial position, and come up with a plan to find a home that we loved and could afford. Her expertise in the real estate market helped us find a home that was affordable, held value, and had everything we were looking for. In a time where much is uncertain, Donna worked diligently to find us the security of a home, all within our budget, and build a plan to make sure we succeed. With her help, we are now in a wonderful home within a community that is perfect for our family, which would not have been feasible had we settled for finding a rental. Having a home base to settle into a put down roots is the best investment you can make!"

Jessica Swan

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