Bottom line is, never do anything you don't understand.
By the way, you typically get your $40,000 when they excercise their right to purchase the house, or at the end of a balloon period. They not paying for the first month is a negotiation tool, I've written contracts when I won't agree to make a payment until I sell the property. It's to cover us both, but before I confuse you too much...if you don't get it, don't do it.
Good luck & Happy Holidays
1. DO NOT SIGN OVER YOUR TITLE!
If you are looking for a renter then that is what the contract should be written as. The 3 scenarios (rent, rent to own, and owner financing) have 3 different contracts and I strongly recommend a real estate lawyer to help with any contract development (think of it as insurance against be sued down the road). It also appears to me that unless there is a reason for the hurry up, you need to slow down the negotiations. If they qualify (good credit and rental history that YOU are happy with) then decide what you want for the security deposit and how much you want as for as money up front (first and last months rent, etc). If you want this to stay as a rental property (or any other of the above for that matter), you need to regain control of the situation, slow it down and do it in a legally correct manner. If you decide to rent to them, once the people are moved into the property AND have a history with you, then YOU can bring up the prospect of Rent to Own or a contract using short term owner financing, with again legal advice to protect you and your interests. Do not let anyone push you into a situation or contract that you are not completely comfortable with. A great place for info is http://www.mrlandload.com. Please let me know how this turns out.
You may want to contact an attorney to draw up the contract. There are different options, but signing over your title should not be one of them. I've got a property in VB in a rent, with the option to buy. Give me a call to discuss further.
Cavalier Mortgage Group
Are the tenants trying to just rent or do they want to rent with option to own?
If they are just renting, then you do the normal rental contract. However, if they want to rent with Option to Own, then you normally want to write up a contract that will cover both end and usually the rent will be higher than the market rent with the excess go towards down payment.
There is usually an agreed upon rental period before they have to buy and there will also be a sales price for when they do buy.
The deal you want to struck is a sale price that will cover your $40,000 equity and $234,000 mortgage and the $15,000 expense.
If you only get $4,000; then not only you are losing the equity, you are still responsible for the mortgage balance to the lenders.
I think you really should hurry up and get a Realtor to represent you to draw up the proper lease with Option to Buy agreement with these guys.
And, NEVER, NEVER sign over your Title or sign any contract unless you understand all and every thing that is in the contract!, Yes, this sound bad to me!