Sometimes, despite your best efforts to sell a rehab property to a homebuyer, you just don’t bring in a buyer who can qualify for a mortgage. Especially these days with new harder meet restrictions and rules set forth for homeowners looking to get a mortgage. It’s just a lot harder to get a good mortgage loan.

Seasoning Problems Make it Harder to Sell

Plus, there is the issue of seasoning when attempting to sell rehab property. The Federal Housing Authority (FHA) has created several new guidelines restricting the houses that can be purchased using loans from mortgage companies that use Principal Mortgage Insurance which is provided by the US Department of Housing and Urban Development (HUD).

The FHA passed these rules to help curb potential house flipping scams which were costing homebuyers a lot of money and ruining their credit. These rules also make it harder for real estate investors who earn a living by rehabbing property. Since they restrict mortgage companies with principal mortgage insurance from giving loans on property that been purchased within the last 90 days of its resale date.

As a result you’ll have homebuyers that may not be able to purchase the home right away from you.

Lease to Own or Renting an Option

If you do have problems selling your rehabbing houses to a homebuyer, but still have lots of people who are interested then you may start thinking about leasing out or renting the propriety. You’ll still get your money back on that real estate investment. It will just take you longer to get the return.

Lease to Own on rehab property is a great option for an interested homebuyer. It gives the seasoning issue a few years to fall out of the equation and also helps you secure a homebuyer for the property now, so it’s not sitting there empty. Plus, your homebuyer will have a few extra years to build up their credit and set aside money for a down payment with the mortgage company.

Lease to Own can be set up in any number of ways. The homebuyer may leas the rehab property for any number of years before a ‘balloon payment’ is required to pay off the rest of the amount owed on the lease. Typically, lease to own agreements last from 3 years, 5 years or 10 years with the balloon payment coming at the end of that time. However, it’s up to your discretion whether or not to include a clause in the lease for repossession of the property if the homebuyer can’t pay the balloon payment on the rehab property. Most investors simply allow the homeowner to remain in the property though and continue to make payments until a later agreed upon date. In rehabbing houses, a bird in the hand is worth two in the bush.

You can also opt to just rent out that property and keep it in your name. You’ll also be making your return in the long run, plus you’ll have additional property to add to your portfolio. However, being a landlord does have its drawbacks.

As a renting landlord you’ll be responsible for maintaining that property for the tenants, which can be a definite drawback. If you decide to lease to own that rehab property instead, the tenants will be the ones responsible for maintaining the property instead, since they are working towards buying the home from you. It’s all very easy to set up in the lease.

Be sure to consider the option of leasing out your rehabbing houses if you can’t find a seller who is able to obtain a mortgage loan. It gives the seasoning issue few years to clear. It gives the homebuyer a few years to increase their earning power and qualify for a loan. Plus, you are still getting some return on your rehab property investment in the meantime.