Lease to Own Training - Due Diligence

When you are doing lease to own investing or rent to own investing a critical step when you find a deal is to do your due diligence. That means you, as the investor, need to do some checking on the home seller to make sure there aren’t going to be problems. What are some of the due diligence steps I take, or train my lease option students to take?

1. Order Pretitle Work - you need to look at the seller’s title to see if there are any clouds or other things that would prevent the seller from selling to you

2. Check IRS/State Tax liens - usually these will show up on the pretitle work. But the home can’t be sold without paying off these liens

3. Check if the Mortgage is up to date - get a signed bank authorization from the seller to allow you to verify that their mortgage is current. It’s also a good idea to verify the amount of the mortgage payment, because if the payment is higher than your agreed upon rent the seller will have to cover the difference.

4. Check if the property taxes are paid - The seller won’t be able to sell the home without satisfying these debts too so you need to make sure they are being properly taken care of.

Not only is it a good idea to verify these things before you sign the deal, but it’s not a bad idea to check up on some of them during the deal as well. You want to make sure that the seller is going to be able to sell you their home when it comes time. When you are doing lease option investing, or rent to own investing due diligence is a step you don’t want to ignore. For more on due diligence see my book, Investing in Real Estate with Lease Options and Subject to Deals.