This business-type is not to be your first business-type. You can't play this game without having cash. Lots of cash. Its investment returns vis-a-vis huge capital upfront, is also not as fast as others. employ this business-type when you have spare cash over your other passion business-types.
In other places where property prices are sky-high, this business-type totally cannot be employed.
Buying a goner property
When you observed the property market, noticed that those properties that are fairly good looking and well-maintained are normally easily bought up by the buyers and banks love to finance such properties. The reason simply being buyers are poor bastards. They got no cash. They only have the initial deposit to down-pay. The rest they hoped like hell that the bank will pay the rest. Hopefully, with a 30-year burden, they will live happily ever after.
Hence, properties that are structurally good but in poor state of repair would take years to complete the sale with prices dropping every 3 months. For this type of property, no banks would finance and thus, no buyers can buy. Further in the white land (unlike yellow or shit lands), the contractors are poor bastards, they can only render services but not cash investments.
When viewing such goner properties, watch for structural damage. If exist, don't buy. If it is only a coat of paint and redo all furnishings, then consider buying it. Bring a contractor along to guess-timate the ultimate total cost.
Give a 50% knock-down, don't be embarrass, your seller realtor already have been marketing for a long long time. She needs to close too for food. She will pressurize the seller to close. Just behave like a poor yellowskin bastard.
If the seller is hard, just move on. There are plenty to choose from.
Once you get it, smile to your contractor.
Renovation
Get your contractor to start to do basic repairs. Give it a good paint. Change all appliances to new ones. Change all toilet bowls, bathtubs, kitchen sinks. Change any old curtains and so on. The total renovation should not cost more than 50% of the purchase price.
Put up a Signage
Put up a RENT-TO-OWN signage and welcome realtors to contact you too. Once the renter come in, get him to sign a rent-to-own contract.
Investment Returns
It should take about 2 years to fully recover the full investment cost. Mean time, you hope like hell, the renter will be late in payment or move out, you can restart the business. With this investment return, you can restart another rent-to-own property every 2 years.
Even if the property is not rented out, you only incur property tax which is super reasonable. No other expenses. You can choose to shut down all services until reconnected.
General Cash-flow Model
Initial Property Purchase: $10,000 (for example)
Renovation Cost: $5,000
Total Property: $15,000
Gross rent-to-own: $600 (+$200 rent-to-own premium) per month (yearly: $9,600 plus any property taxes to be borne by the renter)
Net Rent-to-own: $560 per month (yearly: $6,720, deducted to pay for income tax)
Recovery Period: 2.23 years (=$15,000/$6,720)
Enjoy ...
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