Investors, curious about the required investment and potential returns? Check out our example deal below, before you jump in.

Example of rent-to-own deal with financing

In this example*, an investor can purchase a home for $195,000 on behalf of the tenant. Based on the investor’s financing (financing details), the Principle, Interest, Taxes and Insurance (PITI) is approximately $1,645 monthly.The tenant and investor agree upon a monthly rent of $2,235. The investor will need $29,000 to close on the home. The home will generate approximately $590 per month of cashflow for the investor, yielding a 24% cash on cash return.Once the home owner decides to purchase at 36 months, they can purchase the home from the investor at the previously agreed upon price of $22,300. At this time, the investor will receive the initial invested amount and an additional sum from the difference between the original price of $195,000 and $222,300 (in addition to the historic cashflow).This results in an annual ROI of 44%. The home owner will be able to gain ownership of the home and $27,300 of equity.*For this example, several assumptions were used: State of Illinois, tenant lease option fee of 7.5%, and no property management fees.

Example of rent-to-own deal with all cash

In this example*, an investor can purchase a home for $195,000 on behalf of the tenant. Based on the investor’s financing (all cash). Since the purchase is all cash, there is no Principle and Interest. Taxes and Insurance is approximately $500 monthly.The tenant and investor agree upon a monthly rent of $2,235. The investor will need $194,000 to close on the home. The home will generate approximately $1,735 per month of cashflow for the investor, yielding a 10% cash on cash return.Once the home owner decides to purchase at 36 months, they can purchase the home from the investor at the previously agreed upon price of $222,300. At this time, the investor will receive the initial invested amount and an additional sum from the difference between the original price of $195,000 and $222,300 (in addition to the historic cashflow).This results in an annual ROI of 12%. The home owner will be able to gain ownership of the home and $27,300 of equity.*For this example, several assumptions were used: State of Illinois, tenant lease option fee of 7.5%, and no property management fees.