How does a seller make money on rent to own?

How can the seller/investor make money on rent to own property? It sounds interesting to me but I know little about it. I want to own real estate for the long term but have the benefits of the tenant essentially paying for the house. How do I make money in the RTO business?

You don't. If you want to make $$ what you want to do is rent & keep or trade up.

Buy low, sell high. (That's the basis of capitalism.)

Rent to own simply gives the seller a wider audience of buyers. If the buyer doesn't buy, he rented the property. If the buyer does buy, he's got a sale.

he works you know

sounds like dummy one and two answered this already. first if you owner finance you charge a higher interest rate than the bank. you don't have to pay taxes,ins. or fix anything broken like a landlord does. if the people decide not to pay you get the property back and it has gone up in value.plus you keep the down payment. the downside is it takes longer to foreclose than evict...

You make money off the RTO contract. With a typical lease, you require a market rate deposit and market rate rent. With the RTO contract, you come up with a sale price, a bigger deposit and higher rent (claim you'll apply part of the higher rent to the sale price).

You then put clauses in the RTO agreement that if any part of the agreement is not followed, you cancel the agreement. Since 80% or renters are late on their rent at least ONCE, this traps about everyone.

Since a very small percentage of RTO tenants follow through, you keep a larger deposit, collect higher rent and so on, then look for the next RTO sucker to come along.

I think a lease option or rent to own is an excellent way to invest in real estate. There are a number of ways you make money with one. The simple way it works is this:
Sit down with your tenant/buyer and determine what works for them and for you.
1. How long will the option period be?
2. What will be the price of the property when they buy?
3. How much of an option fee will they pay? You get to use this money for free (no taxes on it) and then you credit it to their DP or the price of the property when or if they exercise the option.
4. How much rent will they pay? You can charge more than the going rate and credit them a portion of it if they pay on time, etc.
5. There is a lot of legal stuff that I'm not going into. Use a lawyer! This is experience talking.
6. Many people never exercise the option and you keep all option money and rent premium.
You make money on the property. You can charge a premium
for helping them be able to buy.
You get use of the option money and keep it if they don't exercise the option.
You get extra rent.
Even though you credit a lot of money back, it's being deducted from the premium you sell the property for.
All in all a very sweet deal.
Good luck.
Don

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High interest rate