One of my readers left comments suggesting that I rent out my properties to stop my financial bleeding, so for the past 3 weeks I have been feverishly trying to do that. I have received large deposits on both vacant properties that I have been trying to sell most of the year. In addition, I am refinancing my rehab from 9.7% to a 6.5% interest rate loan.
The "rent to own" strategy that I have used before is what got me a solution that works. Typically rents for homes in this area average about $1000 per month and many of the callers to my sign could or would only pay that. But I found 3 people who competed for the property and am getting $1750 per month. The couple that is renting the property with an option to buy are paying one months security deposit as well as a $1500 option payment to purchase the property in the next 12 months for a price of $199,000. At that price I will break even on this property (mostly due to the extensive carrying costs that I have incurred). So, I feel fortunate that for the next 12 months I should be cash flow neutral on this property and I shouldn't get burned when I sell. If they don't buy I will probably do the same thing again and should have a positive cash flow.
The "fixer-upper" that I have been trying to sell since February and couldn't give away at an auction has also been "sold". I've given the buyer a 3 year lease for $450 per month with a $375 per month rent credit (He paid a $1500 option price). So after 3 years he will have accumulated credits of $15,000 at which time I will Deed the house over to him. Although I'd rather have the cash this is equivalent to loaning out the $13,500 loan balance at 11% interest rate, so it is a pretty good investment.
My big education this year has been that "flipping" is for the people in growing metro areas - not any places where I have lived. But in areas with poor economic climates rent to own is a high demand product for houses.