Sharks are circling

Seeing a “Rent to Own” sign on a neighboring street this afternoon reminded me that being a housing rip-off artist is easy. Subprime mortgages are just one of the tricks. People wanting to own their own home don’t know the sharks are probably circling when they see those particular rental signs.

A slimy real-estate instructor explained how to make money on “rent to own.” First, you exact a fee of $2,500 or more for a Purchase Option. This isn’t a refundable rent deposit; the money is now yours. Make sure the renters sign an agreement to pay on time every month and exercise the option within one year. If they are late even one time, you keep the money, and they get nothing. Also, if they can’t get a mortgage by the end of the year, tell them goodbye and “resell” the house to the next sucker.

If you keep churning the house, you collect more than you’ll make on the rent, and the residents treat it better because they think they are buying it.

Just in case you have a chance to sell the house with a better deal before the end of the option period, do not register the option with the county registrar. Registering the option would make it difficult to sell the house out from under the renters if you get a good offer.

On the other hand, if you find an attractive rent-purchase deal for yourself, make registering the option mandatory. (Why let someone take you for a ride if you know the tricks?)

Is this all legal? Depends on how the “option” is written. While the recorder’s office suggests getting legal advice, the “smart” investor would remind the mark that “lawyers are in business just to block good deals.”

How do we keep this from happening? Just try to find out. A person in the Cleveland Office of Consumer Affairs referred me to Housing Court, which referred me to Ohio Attorney General Marc Dann’s office, which referred me to the Ohio Department of Commerce. If my landlord was ripping me off on a rent-purchase, do you think I’d have the stomach to follow these convoluted trails through the system? Just bring on the moving boxes.